Thailand Big demand at scheme’s loan auction

The 50-billion-baht loan facility of the Bank for Agriculture and Agricultural Cooperatives (BAAC) for paying rice farmers drew strong demand from local banks yesterday, with almost three times oversubscription and rates set lower than those of government bonds.


Chularat: Low rates are unprecedented

The state-backed farm bank's three-year term loans carry a slightly lower rate than the Bangkok Interbank Offered Rate of 2.2792%, marking the first state-enterprise bonds with a lower rate than comparable government bonds, said Chularat Suteethorn, director-general of the Public Debt Management Office.

The loans charge interest at 27 basis points lower than three-year government bonds.

Total demand at yesterday's term-loan auction was 145 billion baht. Twelve financial institutions took part, with the state's Government Savings Bank emerging as the winner.

The healthy demand reflected financial institutions' confidence in a return to normal after the military coup on May 22, in contrast with the problems faced by the former Yingluck Shinawatra government.

The rice-pledging scheme was at the heart of the previous government's agenda, but it also drew ire over hefty losses and corruption.

Finance permanent secretary Rungson Sriworasat recently said losses incurred from the pledging scheme over the previous five crops could be lower than 500 billion baht.

The Yingluck government was months behind schedule in repaying 92 billion baht to about 850,000 rice farmers, as its hands were tied by a caretaker status that gave it limited authority to borrow fresh funds.

The newly installed military junta has made pledging payments a priority as a pump-priming measure to alleviate farmers' financial burden and create a multiplier effect to boost the country's economic growth.

The BAAC, which bears responsibility for payments to farmers under the rice-pledging scheme, has paid out 40 billion baht to farmers in a week.

The Fiscal Policy Office has said payouts to rice farmers could boost the country's GDP by 0.2 percentage points this year.

Ms Chularat said the BAAC would draw down 30 billion baht of the 50-billion-baht loan facility on Friday and the remaining 20 billion on June 13.