(Bloomberg) -- Thailand’s new Finance Minister Pichai Chunhavajira urged the central bank to support government policies, signaling pressure may continue on the Bank of Thailand to cut interest rates.

“It’s our duty and responsibility for me and BOT (Bank of Thailand) to work together to push both engines - monetary and fiscal policies in the same direction,” Pichai told reporters on Tuesday in his first remarks as finance chief. “But before that we need to understand each other and realize what are the problems.”

 

Tensions between the government and the central bank have flared up again after Paetongtarn Shinawatra, the head of Thailand’s ruling party, said days ago that the BOT’s autonomy posed an “obstacle” to reviving Southeast Asia’s second-largest economy. Prime Minister Srettha Thavisin had been pushing for a rate cut, which the BOT had repeatedly resisted, saying that lower borrowing costs won’t fix the problems.

Pichai’s comments today may dent hopes that Srethha’s stepping down from the finance job will ease those tensions, which had roiled investor sentiment.

Asked whether he thinks the BOT should be under the supervision of the government, Pichai said the central bank has always been independent in its decision-making, though he added that monetary policy must help support the government’s agenda to improve the welfare of the people.

Even so, Srettha said in separate remarks on Tuesday he is “confident” both fiscal and monetary policymakers are trying to communicate. Any move to reduce conflict between the government and central bank is “appropriate,” he said.

“Everybody can have different ideas, but we can talk and crystallize,” said Pichai, who’s concurrently deputy PM for economy, indicating his plans to have a discussion with the central bank. “I believe the idea will be narrow and lead to a good solution.” 

The BOT, which has kept borrowing costs at a decade high of 2.5%, said last month that the decision has given it “policy optionality” to deal with currency volatility, geopolitical risks and uncertainties from the Federal Reserve.

The new finance chief also said he will look into the BOT law and evaluate whether it has problems, replying to a question on whether he will seek to amend the legislation that mandates central bank independence.

Pichai said he plans to meet BOT Governor Sethaput Suthiwartnarueput “as soon as possible” to discuss economic issues. Sethaput has said political pressure won’t sway the central bank’s independent interest rate decisions.  

Last Friday, Paetongtarn, the daughter of Thaksin Shinawatra, also described the central bank’s monetary policy as ineffective, saying that higher public debt was the result of an overuse of the fiscal policy to prop up the economy.

Pichai said his first priority is to boost the economy through the implementation of the so-called digital wallet program that will see 50 million Thais receiving 10,000 baht each. The handout will help spur consumption, repayment of debt and lead to fresh investment, he said.

Thailand’s economic growth rate has lagged its regional peers as some of its products can no longer compete with supplies from other origins, Pichai said. The government will take steps to tackle the problem of high household debt and if the economy doesn’t improve, it’s prepared to use a “strong dose of medicine,” Pichai said.   

--With assistance from Pathom Sangwongwanich.

(Updates with comments from minister from 10th paragraph.)

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