New type of bond may help extended rice subsidy debt payment
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Deputy Prime Minister Pridiyathorn Devakula likes the idea of stretching out repayment of the Bt700-billion rice-pledging debt, possibly through issuing a revolutionary type of savings bond, to free up scarce funds for public infrastructure projects.
“Pridiyathorn has asked the Public Debt Management Office to study whether savings bonds can be issued with maturities longer than 10 years, possibly 30. It would also be a new savings alternative for people,” a Finance Ministry source said yesterday. That would also ease the burden on the budget, the source said.
According to the government’s September 17 policy assignment to state agencies, Pridiyathorn has asked the PDMO to extend repayment of the rice-pledging scheme’s Bt700-billion debt to 30 years.
Currently, the debt is required to be settled within five years.
The government plans to use the budget required for the debt repayment for the Bt2.4-trillion infrastructure project instead.
Pridiyathorn wants to offer savings bonds so that the interest the government has to pay will fall into people’s hands. The bonds may be issued regularly, following the debt-repayment schedule.
The savings bonds could be issued in maturities of 10, 15 and 30 years in anticipation of people’s responses. The PDMO has launched 10-year savings bonds before and the issue was quickly sold out.
The PDMO usually targets a combination of retail, big and institutional investors, as sales to small investors normally incur higher distribution costs than to big investors.
The office is also waiting for the final net loss figure from the rice-pledging account and the Commerce Ministry’s rice-sales plan. The committee in charge of closing the account will hold a meeting late this month.
Luck Wajananawat, president of the Bank for Agriculture and Agricultural Cooperatives, said the borrowing plan for restructuring of the rice-subsidy debt would be proposed to the board meeting chaired by Finance Minister Sommai Phasee late this month.
The debt of about Bt100 billion will come due in fiscal 2015.
“We are waiting for the results of the PDMO’s study on extending the rice-pledging debt.
“Money for debt repayment will come from rice sales and the state budget. If the repayment period can be extended, that would ease pressure on the state budget compared with having to repay it in five years,” Luck said.
In fiscal 2015, a Bt71.3-billion budget is set aside for servicing the rice-pledging debt, while about Bt60 billion is expected to be realised from rice sales to help pay down the debt.
