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Published on October 18, 2007

Proceeds will be used to refinance the short-term debt of the FIDF.

The Finance Ministry and the Bank of Thailand (BOT) are working out details of the bonds' maturity and interest rates, Pongpanu said. Finance Ministry will guarantee the bonds.

The new bonds are likely to attract small investors looking for new investment channels for their money. Earlier, customers snapped up all of the BOT's bonds within a day.

The funds raised through the savings bonds will refinance the short-term debt of the FIDF, which has already borrowed about Bt187 billion from the short-term market.

"However, we don't intend to issue savings bonds worth up to Bt187 billion," he said.

A delay in the amendment of the Currency Act is expected to constrain public-debt management further. Issuing bonds will help generate the money needed to refinance the FIDF, Pongpanu said.

The Finance Ministry and the BOT will design the bonds' maturity to match the lifespan of the FIDF, which will be dissolved once the Deposit Insurance Institution is created.

The new batch of bonds will be added to the regular schedule for savings bonds, which is worth Bt6 billion. The ministry plans to issue about Bt500 million in bonds each month between now and next September.

In a related development, Pongpanu said public debt at the close of fiscal 2007 ending September 30 dropped to 38 per cent of gross domestic product (GDP), from 40 per cent last October. The preliminary figure for public debt at the end of last month was Bt3.196 trillion.

There is room to expand government expenditure, due to the lower public debt, he said. The government has targeted keeping public debt to no more than 50 per cent of GDP, because higher debt suggests fiscal instability.

He said the baht's appreciation against the US dollar during fiscal 2007 helped his office reduce public debt by almost Bt30 billion.

The office took the opportunity to repay foreign debt ahead of schedule. Outstanding debts have been brought down to Bt374.51 billion, from Bt474 billion before.

However, public debt in this new fiscal year is expected to rise to 40 per cent of GDP, because the government and state enterprises will invest more heavily in infrastructure projects.

Wichit Chaitrong

 The Nation