Thai Government to Borrow 270 Billion Baht
The cabinet on Tuesday endorsed the Finance Ministry's plan to borrow 200 billion baht from local banks and 70 billion baht ($7.72 billion) from overseas, in an attempt to revitalise the economy.
Prime Minister Abhisit Vejjajiva said the new borrowing was a contingency plan for an economy still subject to volatility. He urged people not to worry about the kingdom's reserves.
"We asked for the credit line not because we have problems with monetary security as we still have high international reserves. But I wanted to use money from various sources to revive the economy,'' Mr Abhisit said.
According to Public Debt Management Office deputy director-general Chakkrit Parapuntakul, loans from local banks will be used to increase the liquidity of state enterprises. However, they will have to draft their financial plans and propose them to the Ministry of Finance before the funds can be released.
Their short-term credit lines will be no more than 18 months, but the cabinet will consider if the timeframe needs to be extended for each case.
After borrowing the 70-million-baht loan, the country’s public debt would rise from 36 per cent to 42 per cent of the gross domestic product (GDP) this year, Mr Chakkrit concluded.
Of the 270 billion baht approved on Tuesday, 200 billion baht would be in short-term loans raised from local banks to help ease liquidity problems at 58 state enterprises this year. The other 70 billion baht would be borrowed from abroad and allocated mainly for additional economic stimulus programmes including to finance infrastructure building.
According to Mr Abhisit, the foreign borrowings would likely come from the World Bank, the Asian Development Bank and the Japanese International Cooperation Agency (JICA).
The premier said the government was also considering whether to seek other methods for management of the Financial Institutions Development Fund (FIDF) so that it had more money available to boost the economy.
The government currently needs to set aside about 70-80 billion baht a year from its annual budget to pay the annual interest rate burden of the FIDF.
The FIDF spent about 1.4 trillion baht to bail out financial institutions during the 1997-1998 financial crisis. It posted a massive loss as a result as it failed to sell off all the assets acquired.
Initially, the Finance Ministry and the Bank of Thailand, which supervises the FIDF, agreed to share equally the burden in paying off the debt of the FIDF spread over a period of 30 years.
But in the end, only the ministry shouldered the debt repayments for the FIDF, as the central bank insisted that it did not make sufficient profits from its operations to pay off the FIDF's debts.
Finance Minister Korn Chatikavanij said the government's new borrowing would raise public debt to 3.9 trillion, representing 41 per cent of gross domestic product (GDP), up from 3.4 trillion baht now, accounting for 37 per cent of GDP.
Mr Korn said the government has promised to maintain monetary discipline so that the public debt ratio would not exceed 50 per cent of GDP.
The Public Debt Management Office projects in the worst-case scenario public debt to GDP will be at 43-44 per cent of the GDP if the economy does not grow at all and there is deflation this year.
Source - The Bangkok Post