Thailand No Longer Pursuing Sovereign Wealth Fund
The Bank of Thailand and Thailand Ministry of Finance have agreed to not use the country’s foreign reserves to create a sovereign wealth fund. There was a significant internal debate among Thailand’s governmental financial bodies on if it was feasible to create a sovereign wealth fund. Including Thailand, the majority of Asian countries intervene to lower the value of their currency. By practicing currency intervention, Thailand and other countries that follow a similar activity, usually hastily accumulate international reserves.
Central banks are known to be conservative “investors” and usually invest in assets with low default risk and high liquidity, thus yielding very low returns. This negative carry has been pushing some central banks into yearly losses.
Left and right, Thailand observes its Asian peers creating sovereign wealth funds to deal with excess foreign reserves.
Thailand Finance Minister Thirachai Phuvanatnaranubala wanted to see if it was possible to invest around US$ 180 billion in foreign reserves in higher-yielding assets. The big concern was government interference or meddling in the central bank over the excess foreign exchange assets.
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