The Thai cabinet approved measures designed to help contain the appreciation of the baht Tuesday. The rise in the Thai currency has hurt businesses, and part of the new measures are intended to help struggling businesses. They also include a tax on foreigners who are investing in Thai bonds. The Thai Finance Minister, Korn Chatikavanij has said that there may be more capping measure on capital flows to follow if the situation worsens.
"We need to consider the rationality of capital inflows, whether they are for speculative purposes and how much they generate volatility in the baht," Mr. Korn said to reporters after the measured were approved.
According to the Revenue Department, the proposed tax of foreigner’s capital gains and income from interest on government and Bank of Thailand bonds, which is a planned 15 percent, will come into law Wednesday.
Mr. Korn acknowledged that the tax will not likely generate a rapid outflow of capital, but is will probably slow down inflows into the government bond market, which is important given that the state of the US economy means that other currencies, the baht included, are likely to continue rising.
The baht has risen around 10 percent against the US dollar this year, but the Thai government is seeking to stop and influx of ‘hot money’ into the economy. Investors are attracted to the resilience of the Thai economy as well as the fact that yields tend to be higher in Thailand than in the US and other western nations.
