BOT backs govt’s borrowing plan, but urges higher repayment ratio
Bank of Thailand offers conditional support for the government’s plan to borrow 1.204 trillion baht for fiscal 2025, advising higher debt prepayment ratio to prevent future financial risks
The Bank of Thailand has told the Cabinet that even though it does not object to the government borrowing another 1.204 trillion baht in fiscal 2025, it believes the repayment ratio should be increased.
A Finance Ministry source said on Monday that the BOT let its opinion be known to the Cabinet to deliberate along with the public debt management plan for fiscal 2025.
The source quoted the BOT as saying in its opinion statement that the central bank was not against the fiscal 2025 public debt management plan, because it had been approved by the Public Debt Management Board.
However, the BOT noted that the borrowing to compensate for budget deficits of fiscal 2024 and 2025 could overlap massively, so the government should be very cautious when rallying loans from financial institutions and the bond market.
According to the source, the BOT also advised that the government should use a variety of tools to get loans and should regularly communicate with the markets to avoid an impact on the bond markets of both private and public sectors.
The source said the BOT also advised the government to boost its debt repayment ratio, saying if the payments were too low, they may spark financial risks in the future.
The BOT also noted that the government should instruct state agencies and enterprises to speed up investment under this public debt management plan so their investments would contribute to economic revival.
However, the central bank advised the government to monitor the spending of state enterprises that need to take loans despite their inabilty to pay back. Such enterprises, it said, should undergo rehabilitation plans.
The central bank also pledged to work closely with the Finance Ministry to ensure the government’s borrowing plan is sucessful, the source added.
The public debt management plan for fiscal 2025 breaks down to 1.204 trillion baht worth of borrowing, the management of existing debt of 1.783 trillion baht and the repayment of 489.11 billion baht.
As part of the plan, the Cabinet will expand the loan ratio for four state firms – the Bangkok Mass Transit Authority, the State Railway of Thailand, the National Housing Authority and the Dhanarak Asset Development Co Ltd – even though their debt service coverage ratio is below 1:1.
