Short-term external debt in the private sector has increased significantly since the recent economic slowdown set in, according to a Bank of Thailand (BOT) survey.

As of March 31, short-term foreign debt among companies, except for banks, accounted for 21.1 per cent of the country's aggregate external debt, significantly higher than 12.3 per cent at the end of 2000.

It has risen from US$3.6 billion (Bt136 billion) to $5.5 billion over the last six years. It accelerated significantly in 2005 by 25.1 per cent from the previous year, compared with a 6.5-per-cent year-on-year increase in 2004. Short-term debt accounted for 21.2 per cent of the country's total external debt in 2005, up from 16.5 per cent in 2004.

A BOT source said the rising short-term debt might result

from a change in debtors' behaviour.

"It is possible that the debtors have shifted from long-term borrowing to shorter but we don't know the reason yet," said the source, who requested anonymity.

The survey covered 3,240 non-bank companies.

The short-term debt excluded trade credits.

According to the BOT, short-term external debt as of March 31 had increased 26.5 per cent from the time last year, higher than the 12.5 per cent increase of total external debt over the same period. Total private non-bank external debts were $26 billion as of March 31.

 The source said external debt had continued to grow at a satisfactory pace.

The ratio of gross reserves to short-term debt was 3-to-1 at the end of March and headed

north further to 3.3-to-1 as of

April 30. International reserves shot up to $58.1 billion at the end of June.

"They are still in line with international standards but we will closely monitor the proportion and the trend," the source said.

Before the economic crisis, the private sector eagerly incurred short-term debt, resulting in the country's short-term external debt reaching its peak of 52 per cent of total external debt in 1995.

The relatively high short-term debt led to a massive capital outflow during the crisis after foreign creditors recalled their loans over concerns about Thai debtors' ability to service their debt. Short-

term debt then declined dramatically.

Of the total $26 billion in

foreign debt as of March 31, 58.1 per cent, or $15.1 billion, was in the form foreign-denominated loans, 31.7 per cent was in baht-denominated loans and 10.2 per cent was foreign-currency debt securities. US dollar-denominated loans declined to 49.7 per

cent of total debt at the end

of the first quarter, far less than the 76.2 per cent as of December 31, 2000.

The proportion of baht-denominated debt, however, rose to 31.7 per cent from 7.9 per cent during the same period.

Anoma Srisukkasem

The Nation