UDPATE 1-Top Thai court hits Thaksin over Myanmar loans

(Adds stock market reaction, baht, edits)

BANGKOK, July 30 (Reuters) - Thailand’s Supreme Court agreed on Wednesday to hear a case against ousted Prime Minister Thaksin Shinawatra over allegations he arranged soft loans to Myanmar while in office to benefit his family’s telecoms business.

The decision is the latest blow to Thaksin’s bid to clear his name after a 2006 military coup in which he was removed on the pretext of “rampant corruption”, as well as to the six-month coalition government widely seen as his puppet.

The stock market, which has fallen 22 percent since anti-government street protests started two months ago, lost 0.5 percent amid more worries about political stability at a time of stuttering growth and decade-high inflation.

The same court agreed on Monday to probe Thaksin’s entire cabinet, including three ministers now serving in the current administration, for allegedly breaking anti-gambling laws in a push to launch a new state lottery in 2003.

In the Myanmar case, an army-appointed graft panel accused Thaksin of ordering a state bank in 2004 to increase the size of a loan to the military-ruled former Burma to buy telecoms equipment from a unit of Shin Corp, the telecoms conglomerate Thaksin built.

The deal caused the bank to lose 670 million baht ($20 million), the panel alleged. Thaksin has denied any wrongdoing, as he has in several other investigations launched against him.


Prime Minister Samak Sundaravej is expected to reshuffle his cabinet this week to try to turn the tide of criticism against his government, which has ranged from its handling of the economy to a nationalist spat with Cambodia over an ancient Hindu temple.

A small party announced its departure from the six-party coalition on Tuesday, but Samak said this would not derail his plans to submit a list of new ministers to the king for approval.

“It won’t affect the cabinet reshuffle,” he told reporters in answer to a question about the withdrawal of the Pue Pandin (For the Motherland) party from the coalition.

Announcing his departure, Pue Pandin boss and Industry Minister Suvit Khunkitti also criticised Samak’s push to amend the 2007 army-designed constitution, widely seen as designed to prevent a return to power by Thaksin, now banned from politics.

“We think amending the constitution is less important than tackling the economic problems,” Suvit said.

Samak has kept unusually quiet about his new line-up, saying only that it will involve 10 portfolios, although the media are speculating it will contain a host of Thaksin loyalists keen on his brand of big-spending, populist government.

“The names of new ministers being speculated on in the newspapers suggest that those who have been loyal to Mr. Thaksin are being favoured,” political commentator Sukhum Nuanskul told Reuters.

The baht also came under pressure on Wednesday after cabinet appointed six decidely pro-Thaksin officials to the 12-strong Bank of Thailand board that analysts said might lead to a watering down of its efforts to fight inflation.

The six new appointees to the board, which can change the make-up of the bank’s rate-setting committee, are allies of Finance Minister Surapong Suebwonglee, one of Thaksin’s most trusted aides who has criticised the decision to raise rates this month. (additional reporting by Nopporn Wong-Anan, Writing by Ed Cropley; Editing by Alan Raybould and David Fogarty)