Plan for farmers’ bank to fund digital wallet with 172bn loan hits snag

FRIDAY, APRIL 19, 2024

The labour union for the Bank for Agriculture and Agricultural Cooperatives (BAAC) is seeking legal clarity on whether the government can borrow from the state bank to fund its digital wallet scheme.

The digital wallet committee said last week that the 500-billion-baht scheme would be partially funded with a loan of 172.3 billion baht from the bank, which supports 17 million farmers. The remaining funding would come from the 2025 budget (153 billion) and the current budget (175 billion).

The bank is already awaiting government compensation totalling over 619 billion baht for state aid delivered to farmers, though its liquidity reportedly stands at around 200 billion baht.

The BAAC labour union has voiced opposition to the loan plan.

Prayat Thammakhan, secretary-general of the union, said earlier this week that his members were concerned such a huge loan could impact depositor confidence, while Prime Minister Srettha Thavisin had to deny reports of a run on the bank. Meanwhile, former finance minister Korn Chatikavanij has voiced doubts over the legality of using the BAAC to fund the digital wallet scheme.

The scheme is a flagship policy of the Pheu Thai-led government that aims to stimulate the economy with 10,000-baht payments to around 50 million Thais aged 16 and above.

The BAAC is normally used to make payments directly to farmers under state aid programmes such as rice-price-pledging schemes.

The bank is currently awaiting compensation from the government totalling 619.173 billion baht for state projects to support farmers from 2011 to 2040.

Projects approved by the current government include the 2024-26 Debt Suspension Programme for Farmers costing 32.573 billion baht, the 2023/24 Paddy Mortgage Credit Programme (1.286 billion), and the 2023/24 Paddy Collection Credit Programme (3.736 billion).

The government has earmarked 1.18 trillion baht from the current budget to pay for these schemes but also has room for off-budget spending to fund the digital wallet loan.

Finance Deputy Minister and BAAC chairman Julapun Amornvivat, has insisted that use of the BAAC to fund the digital wallet scheme will be lawful, adding that government agencies overseeing the scheme are satisfied with the plan.

Under Article 28 of the Financial Discipline and Treasury Reserve Act, off-budget expenditure for state projects is usually limited to 32% of the total budget, with no plans for expansion.