Energy Ministry seeks Bt150bn loan guarantee decree as diesel rises to Bt33 a litre

Thailand’s Energy Ministry is preparing to ask the new government to issue an emergency decree allowing the Finance Ministry to guarantee up to Bt150 billion in borrowing by the Oil Fuel Fund, as authorities seek to shore up liquidity and cushion domestic oil prices against volatility linked to the Middle East crisis.

A source at the Energy Ministry said the ministry and the Finance Ministry were in close talks over measures to support oil prices, with the proposed decree expected to be submitted to the Cabinet once the new government formally takes office.

Under the plan, the Finance Ministry would act as guarantor for loans taken out by the Oil Fuel Fund, helping strengthen the fund’s liquidity as it copes with swings in global oil prices.

The source said the proposed borrowing ceiling of Bt150 billion would match the framework used under a 2022 emergency decree introduced during the Russia-Ukraine war, which allowed the Finance Ministry to guarantee debt repayments for the Oil Fuel Fund. At that time, however, the fund did not borrow up to the full ceiling, drawing about Bt120 billion instead.

The source said a Bt150 billion framework should be sufficient to cope with oil price volatility. The Oil Fuel Fund is also said to retain borrowing capacity of another Bt20 billion, which could serve as an additional mechanism to help support domestic fuel prices. The government is also preparing excise tax reductions on oil as a further option.

A Finance Ministry source said any decree allowing the ministry to guarantee Oil Fuel Fund borrowing would be counted as part of public debt. Even so, the move would not push public debt above the ceiling of 70% of gross domestic product, with the current ratio standing at 65.96%.

The Public Debt Management Office would be responsible for facilitating the borrowing process for the Oil Fuel Fund by arranging loan sources and providing guarantees under the decree, while the fund itself would remain responsible for repaying the debt.

If the Cabinet approves the decree, the Finance Ministry would also need to revise its public debt management plan for fiscal 2026 in order to increase the permitted level of new borrowing tied to the guarantee scheme. That revised plan would then be submitted to the Cabinet in a subsequent agenda item so the decree could take legal effect.

The source said this would mark the second revision of the fiscal 2026 public debt management plan and insisted that public debt would remain within the legal ceiling even after the guaranteed borrowing was included.

Diesel raised to Bt33 a litre

In a related move, the Oil Fuel Fund Executive Board has approved a reduction in diesel price subsidies, pushing the retail diesel price to Bt33 a litre from March 24 in an effort to preserve the fund’s liquidity.

Pornchai Jirakulpaisarn, director of policy and planning at the Oil Fuel Fund Office, said the decision followed a sharp surge in diesel costs in the Singapore market after the attack on Iran and the wider escalation in Middle East tensions.

He said diesel prices in Singapore had jumped from US$92 a barrel to US$223 a barrel, an increase of more than US$131. That translated into an additional cost burden of Bt26 per litre, forcing the Oil Fuel Fund to shoulder subsidy costs of nearly Bt2.4 billion a day, or around Bt70 billion a month.

Given that scale of burden, he said, reducing the subsidy had become urgent in order to keep the fund liquid enough to continue stabilising prices over the longer term.

Another key reason behind the diesel price rise was to narrow the gap with neighbouring countries, where fuel prices are already higher. Malaysia, for example, raised diesel prices from Bt32.40 a litre on March 16 to Bt38.70 a litre.

Officials warned that keeping Thai diesel prices too low would create incentives for fuel smuggling and stockpiling for speculative gain. Raising the domestic price, they said, should help curb such practices and prevent national resources from leaking to profiteers.

Pornchai said the board had no choice but to lift diesel to the ceiling of Bt33 a litre in order to manage the Oil Fuel Fund’s liquidity and ensure it could continue cushioning prices during a period of severe market volatility.

He added that all neighbouring countries now had diesel prices above Bt33 a litre, and warned that failing to adjust the price now would leave the fund carrying an unsustainable burden that could eventually affect the country’s energy security.