(Bloomberg) -- The Thai government’s campaign to pressure the Bank of Thailand to cut interest rates suffered a significant setback, with the Office of the Council of State effectively ruling that the official nominee to be chairman, former finance minister Kittiratt Na-Ranong, is not suitable.
Without directly naming Kittiratt, Secretary-General Pakorn Nilprapunt said in a statement that “Mr. K’s” role as an adviser to the prime minister means he is a “person holding a political position” who was appointed for political reasons and is therefore not qualified.
While the chair of the Bank of Thailand is not involved in monetary policy meetings, they can evaluate the governor’s performance and also have a say in which outside experts join the seven-member rate panel. The council’s legal opinion means that if the government tries to push ahead with Kittiratt’s appointment, it could face political risks and challenges.
It’s also possible the selection process must start over.
Kittiratt earlier this week posted on Facebook that he will “respect the decision” as to whether he becomes the central bank’s chairman.
Pakorn’s statement didn’t mention the central bank’s own nominees, Kulit Sombatsiri, who has previously worked at the energy and finance ministries, and academic Surapon Nitikraipot.
Read: Former Thai Central Bankers Pitch for Apolitical Board Chair
The government hasn’t immediately commented on Friday’s announcement, which comes just three days after the Thai Post, citing the finance permanent secretary, reported that the council had decided Kittiratt was unqualified. Within hours of that report, the Office of the Council of State’s Pakorn declared it had not yet concluded its legal opinion.
That underscored the sensitivity of the issue, with Thailand already having delayed naming a new chairman as opposition mounted against Kittiratt, a former member of the ruling Pheu Thai party. The Economists for Society group, which includes former multiple former central bank governors, in November warned a chairman with strong political links would raise questions about the independence of the Bank of Thailand.
Read: Thai Ex-Central Bank Chiefs Urge PM to Reject BOT Chair Choice
The Thai government has been looking for ways to increase its influence over the central bank, and Bloomberg News reported in June that it was considering using the chairman’s role as a means of gaining leverage.
Read: Thai Government Eyes Tighter Grip on Central Bank After Spat
The Bank of Thailand has cut its benchmark rate by a quarter point this year, to 2.25%, but at its most recent meeting held borrowing costs unchanged.
The government wants lower borrowing costs to reduce the burden of household debt, but BOT policymakers say rates are appropriate and other measures are needed to boost growth.
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