Bonds with no deficit
Amendments to the Public Debt Management Act will soon permit an increased supply of government bonds in the market by allowing the government to issue bonds even if it is not running a fiscal deficit, says the Finance Ministry.
"The Cabinet yesterday approved draft amendments to the Public Debt Management Act, aimed at assuring an adequate supply of government bonds in the market and further deepening bond-market development," said Public Debt Management Office director-general Pongpanu Svetarundra.The current Act allows the government to issue bonds only to finance budget deficits, while the new law will give the green light for the government to issue bonds whether or not it is running a deficit, he said. There is currently Bt4 trillion worth of outstanding bonds in the Thai market, or about 50 per cent of gross domestic product (GDP). Of these, 18.8 per cent are government bonds. Pongpanu said if the government wanted to ensure market liquidity, it should issue bonds amounting to more than 20 per cent of GDP. The governments of Singapore and South Korea, for instance, both issue bonds equalling more than 30 per cent of GDP, and the level of government bonds in Malaysia is about 30 per cent. "Larger supplies will effectively create a benchmark yield curve for the Thai domestic bond market," he said. The Finance Ministry also announced the creation of a Bond Market Development Fund, which will invest in both government and foreign bonds that are rated AAA. As well, it will set up a Public Debt Management Fund to provide flexible debt management. Wichit Chaitrong The Nation
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