Thailand cuts FIDF remittances, extending public debt repayment

The Financial Institutions Development Fund (FIDF) has announced a reduction in its annual remittance, a move that will not directly impact public debt but will extend the repayment period and increase interest costs.

The government's decision to reduce the FIDF remittance to 0.23% for three years is expected to decrease public debt by approximately 63% by the end of fiscal year 2025. This reduction will lead to a 1.5-year extension in the debt repayment period and an annual interest burden increase of around 500 million baht.

Patchara Anuntasilpa, director of the Public Debt Management Office, explained that the Bank of Thailand (BOT) would remain responsible for all principal and interest payments, and the debt would continue to be classified as public debt. With a remaining FIDF debt of approximately 500 billion baht, the maturity date is projected to extend to 2032.

Patchara assured that the reduction in remittances would not strain the government's budget but would instead impact the BOT's financial position. However, the BOT has deemed the benefits of the reduction, such as aiding financial institutions and facilitating debt restructuring for struggling borrowers, to outweigh the costs.

To support struggling debtors, the Ministry of Finance has introduced a moratorium on interest payments and reduction in principal instalment for specific groups. These include:

• Homeowners with properties valued at less than 3 million baht and non-performing loans (NPLs) of one year or less
• Car owners with vehicles priced below 800,000 baht and NPLs of one year or less
• Small and medium-sized enterprises (SMEs) with loans of 3 million baht or less and NPLs of one year or less

The ministry estimates that this initiative will benefit approximately 460,000 homeowners, 1.4 million car owners, and 430,000 SMEs, with a combined debt of 1.2 trillion baht.