PDMO may switch borrowing to 1-year bonds
The Bank for Agriculture and Cooperatives (BAAC) has proposed that the Public Debt Management Office (PDMO) borrow an additional Bt170 billion to facilitate the government's rice-pledging programme.
However, the PDMO will in turn consider a change in conditions for the BAAC from short-term borrowing from a financial institution to issuing one-year-term bonds. This strategy is to reduce government costs from rising interest on short-term-loan charges by financial institutions.
“The rising interest rates charged by financial institutions have pushed up our costs, so that we have to change the borrowing condition to issue one-year-term bonds instead, for which the interest rate should stay at 3 per cent,” said Chakkrit Parapuntakul, director-general of the PDMO.
He said the BAAC’s borrowing proposal this time was for an additional budget approved by the government to subsidise rice prices, for which it had previously borrowed Bt90 billion.
Chakkrit added that the PDMO had not planned to borrow any large sums of money – although the government requires a huge amount for flood-protection development from the central budget. It will cost Bt120 billion, together with Bt350 billion for a mid-term flood-protection project, as well as Bt50 billion to support natural-disaster insurance.
The office forecast that borrowing this year would be lower than last year. Although it had set up a budget deficit of Bt400 billion, the office borrowed only Bt260 billion and has no plan for further borrowing thanks to more treasury reserves.
He said interest rates in the market were now fluctuating abnormally, reflected in the borrowing cost at the Bangkok Interbank Offered Rate. In fact, the government has enjoyed a lower rate than Bibor but is now charging 20-30 per cent higher than standard. The Bibor rate for six-month borrowing stands at 3.2 per cent.
Both commercial and state-run banks offer the same reason for the higher interest – that it derives from the government’s policy to increase surcharges on deposits.
“If short-term financial support is increasing, businesses will be affected and, without any way out, they will be forced into trouble and unemployment problems,” Chakkrit said.
He said the Finance Ministry had also given approval to five foreign entities to issue bonds or debentures in Thai baht before next January 31 for a total amount of Bt33 billion.
They are the International Bank for Reconstruction and Development, the International Finance Corporation, and Swedish Export Credit Corp, handling Bt5 billion each; Korea Gas Corp, Bt8 billion; and Kookmin Bank, Bt10 billion.
