Funds urged to invest in OS to curb rising baht

More money from the Government Pension Fund (GPF) and Social Security Fund (SSF) should be invested overseas to cool down the strong baht, according to the Finance Ministry.

Permanent secretary for finance Somchai Sajjapongse said the appreciating baht results from an inflow of foreign capital. Several approaches can be used to send money out of the country to ease the baht, including supporting Thai business operators to invest overseas as well as funneling more money from the GPF and the SSF to invest abroad.

He said some members of the both funds may feel uncomfortable that more of their money is going overseas, so at this stage overseas investments from the funds may be pushed to the ceiling first.

The ceiling for overseas investment by the SSF is set at 30%, but only about 26% of the fund’s investment coffers had been invested in foreign bonds as of the end of last year, according to the Labour Ministry.

As of the end of last year, the SSF had 1.76 trillion baht, of which 1.24 trillion baht came from contributions by the fund’s subscribers, their employers and the government and the rest returns on investments. The GPF had 834 billion baht as of the end of last year. In its investment portfolio of 382 billion baht, about 12% was invested in overseas stocks (OS) and 2% in foreign bonds.

Mr Somchai said the Thai baht is strong compared to Thailand’s trading partners. Thai exporters need to compete on prices with others in global markets, which not only focus on the quality of products, but also prices.

With the strong baht, small and mediumsized enterprises (SMEs) are more likely to feel the pinch, he said. The Bank of Thailand will be asked to help address the matter since the strong baht would make it hard for Thai operators to compete with foreign traders.

Sorapol Tulayasatien, director of the Fiscal Policy Office’s Macroeconomic Policy Bureau, said the baht has appreciated 3.53% to 31.29 baht per dollar. The Finance Ministry has rolled out various measures to ease the rising baht, including repaying foreign debt before the due date, which would help send one billion US dollars out of the country, he said.

Mr Sorapol said the economy is projected to grow 4% this year on the back of rising exports, which last year jumped 9.9%, the strongest rise in six years.