BAAC to get Bt10-bn compensation

The National Legislative Assembly's scrutiny committee of the budget bill for fiscal year 2008 agreed yesterday to give the BAAC the sum as compensation for subsidy schemes initiated by previous governments, said BAAC president Thirapong Tangthirasunan.

He said 18 subsidy projects since 1999 had resulted in a financial burden for the BAAC, with the total cost estimated at Bt20 billion. He expected the other half of the cost would be compensated in fiscal 2009.

Previous governments, especially Thaksin Shinawatra's, had implemented subsidy projects, including pledging schemes for rice and sugar cane.

Since the government usually offers a higher price via pledging of farm products, farmers did not redeem their contracts, resulting in financial losses for the bank, Thirapong said.

The current government still does the same thing but at lower cost. The BAAC had asked for full compensation of Bt20 billion but the government agreed to give the bank only half of the amount first.

Thirapong said the strengthening of the baht indirectly affected the BAAC because the income of farmers was reduced. Appreciation of its currency increased the prices of Thailand's exports, resulting in less competitive products in the world market.

Thirapong said the market expected interest rates to rise between 25 to 50 basis points by the end of this year. Meanwhile, the BAAC will try to hold its rates unchanged, he said.

The BAAC, a government-owned specialised financial institution, has tried to expand its credit in order to boost the economic growth of the grassroots community since April this year. It plans to lend Bt26 billion to support farmers and low-income groups under the policy of Finance Minister Chalongphob Sussangkarn. As of July 2, the BAAC had lent Bt7.83 billion, Thirapong said.

After coordinating with the BAAC, the European Commission to Thailand yesterday granted Bt150 million to four non-government organisations for the economic and social rehabilitation of southern communities affected by the 2004 tsunami. They will help poor people in Phuket, Phang Nga, Krabi, Trang and Ranong to recover from hardships.

Wichit Chaitrong

 The Nation