Bonds for infrastructure projects

The ministry is considering raising Bt30 billion to Bt50 billion via the bonds for fiscal 2012. Amortising bonds pay part of the principal along with coupon payments, usually in their later years (for example, holders of 15-year amortising bonds typically receive partial principal repayments between the 11th and 15th years). Holders of conventional bonds, on the other hand, have their principal repaid in full when the bond reaches maturity.

Amortising bonds are well suited to public-private partnerships in infrastructure projects that start to generate returns before the maturity date of the bond, he said. Over the next four years, the government needs to invest about Bt1.6 trillion in high-speed-rail projects, and as much as Bt600 billion in water-management projects.

Chakkrit said amortising bonds also kept government spending disciplined, as they forced the government to repay investors’ principal according to specific timetables.
When the government decides to delay the repayment of principal on a certain debt, a ballooning interest burden is the result, he said.

For example, the principal debts of the Financial Institutions Development Fund are Bt1.14 trillion, and its annual interest payments are as high as Bt60 billion.
Public debt currently is Bt4.2 trillion, equivalent to 40.22 per cent of gross domestic product. The debt level is considered to be manageable but critics say it could rise as the government needs to invest more and plans to spend on populist and social-welfare programmes.