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Published on February 23, 2008

The debt moratorium was part of the populist policies that endeared former prime minister Thaksin Shinawatra to rural voters.

Some economists criticised the policy for creating moral hazards and being ineffective. For instance, in spite of the debt moratorium in 2001, some farmers continued to accumulate debts because they did not have an alternative profession to earn a living.

However, Surapong said the government would continue the debt moratorium for 330,000 farmers for three years. These farmers had a total debt of Bt1.8 billion.

He added that the number of farmers under the new programme accounted for only 15 per cent of farmers under the 2001 programme.

The ministry will also restructure debts for an additional 1.7 million farmers who will receive an interest rate cut of 3 percentage points. Currently, the average loan rate is 7 per cent. These 1.7 million farmers were indebted for a combined Bt85 billion. Surapong said details would be announced in late March.

 The Finance Ministry is also considering a tax package to boost the economy. The Revenue Department proposes to maintain value-added tax at 7 per cent for another two years and also cut corporate income tax for newly listed companies on the stock exchange. The companies' size and income would also be taken into consideration. Surapong said exact details had yet to be finalised.

Earlier, there was speculation the government would also provide additional tax deductions by increasing the amount of insurance in a tax waiver from Bt50,000 to Bt100,000.

There was also a proposal to increase the mutual fund investment eligible for tax waivers to be increased from Bt100,000 to Bt500,000, but the Finance Ministry has yet to decide on the issue.

Wichit Chaitrong

The Nation