FRIDAY, March 29, 2024
nationthailand

BOT joins Bt300-bn post-flood loan plan

BOT joins Bt300-bn post-flood loan plan

Will provide 70% of funding; minister opposed to bank taking FIDF debts

The Bank of Thailand has agreed to join the government’s Bt300-billion soft-loan scheme for flood-hit SMEs and individuals, but should not be saddled with the state’s bail-out debts, Finance Minister Thirachai Phuvanatnaranubala said yesterday.
“The amount, based on the central bank’s survey, should be sufficient. This is on top of our plan to have state-owned and commercial banks extend Bt320 billion to individual and corporate flood victims,” he said.
Borrowers will be charged 3 per cent per year through the five-year term.
Under the draft bill to amend the Bank of Thailand Act to allow the central bank to join the scheme, the central bank will contribute 70 per cent of the amount while state-owned and commercial banks will pitch in the rest. The draft bill awaits Cabinet approval.
The amendment would be for a one-time offer in light of a special event like the massive flooding, he said, adding that he signed the bill yesterday.
The severe flooding has demanded huge financing from both the private and public sectors. To free up borrowing capacity, the government is seeking to push the Financial Institutions Development Fund’s Bt1.14-trillion debts onto the central bank.
Thirachai said he explained to the Cabinet on Tuesday that such a move was impossible, since it would force the central bank to print money to absorb the debts. This would endanger the country's credit rating and hurt all companies.
There are two options to handle the FIDF debts, he said. One is to amend the central bank’s accounting rules to allow investment in assets including gold and reducing the FIDF’s interest burden with the profits.
The other is that the Deposit Protection Agency’s fund, collected from the deposit base, could be borrowed for interest payments, which are estimated at Bt45 billion a year. Banks now contribute about Bt39 billion annually to the DPA.
“I will discuss these with Khun Kittiratt [Na-Ranong, deputy prime minister] on Friday,” he said.
Due to the floods, the fourth quarter’s economic contraction will be 5 per cent, which will drag the full-year growth rate down to 1.1 per cent, against 7.8 per cent last year, said Somchai Sujjapongse, director-general of the Fiscal Policy Office.
However, the growth rate next year is expected to bounce back to 5 per cent on the low base of this year.
“The flood impact is worse than expected, as manufacturing has been hard hit, causing many plants to suspend operations,” he said.
Value-added taxes contracted by 1 per cent in October – the first time in the past two years – suggesting a weakening in consumption due to the flood. Floods started to impact the economy that month, he said.
Sales of commercial vehicles plunged by 71.5 per cent, suggesting weak private investment.
The Manufacturing Production Index last month dived by 48.6 per cent, due largely to the halt in output as a result of the floods. Public spending also slumped by 5.7 per cent.
Private consumption this year expanded at 2.3 per cent, while private investment was up 8.4 per cent.
Public investment shrank by 6.6 per cent this year. The government needs to improve its budget spending next year in order to lead private investment, otherwise the economy would grow less than 5 per cent, he warned.
Public spending next year could rise to Bt2.93 trillion on central government spending of Bt2.38 trillion, state enterprise spending of Bt255.75 billion and local government spending of Bt294.39 billion.
The government is expected to be able to disburse 93 per cent of fiscal 2012 budget appropriations. That could push up inflation to 3.5 per cent, but still slightly less than this year’s 3.9 per cent.
Somchai expects a policy rate cut in the first half in light of global uncertainties, but the Bank of Thailand may jack up the rate in the second half to control inflation.

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