Baht flow puzzle
Re: "The baht's troubling rise", (Editorial, Sept 22). It is much discussed in the media and on social media about the mysterious inflow of money that causes the Thai baht to strengthen. Accounting-wise, the inflow is recorded as "Errors and Omissions". Even the finance minister-to-be said that he would have a discussion with the Bank of Thailand (BoT) about the issue. It is feared that the inflow is grey money.
There is nothing mysterious or involving grey money with the issue. It is a problem with the reporting system and accounting standards. Let me take you through a step-by-step transaction of the speculative inflow.
1. An investor wants to buy Thai baht -- say US$100 million (3.2 billion baht) -- speculating that the baht would soon strengthen in the near future.
2. The transaction is done in Singapore, which is Southeast Asia's international currency market. The investor, through a Singaporean broker, posts that he wants to buy $100 million worth of Thai baht.
3. If there is no offer at the market price, the price of the baht/dollar will fall to attract sellers of Thai baht, i.e., the baht strengthens. To prevent a stronger baht, the BoT jumps in to purchase those $100 million in exchange for Thai baht.
4. Since the transaction is done in the Singapore market, the Singaporean broker does not report the transaction to BoT, and the $100 million transaction enters our balance of payments as an unidentified inflow under the category of errors and omissions. The reason is that no transactions are conducted in Thailand, but dollar inflows are added to the foreign reserve.
5. This phenomenon is common. The World Bank even regularly reports on "errors and omissions" in member countries. Yet, it becomes an issue in Thailand because of politics.
6. Vietnam's errors and omissions are twice the size of Thailand's, with $29.18 billion in 2024. That is because Vietnam's exchange market is inefficient, and Vietnamese traders use the Singapore market instead. Tax evasion might be another reason.
