$2-bn offshore loan progamme planned

The Finance Ministry will next Tuesday seek Cabinet approval to borrow an initial US$2 billion (Bt70 billion) from international lending agencies as part of its economic revival and restructuring programme.

The Cabinet will also be asked to approve a short-term credit facility framework with a ceiling of Bt200 billion for state enterprises to borrow from domestic commercial banks, according to government sources.

As for the $2-billion offshore loan programme, the Finance Ministry is seeking a mandate to approach and negotiate with the World Bank, the Asian Development Bank and the Japan International Cooperation Agency for the funds.

Sources said the interest rates to be charged by these foreign agencies were lower than those charged by domestic funding sources, averaging 2.38-3.7 per cent per annum for loans with a maturity of 10 years.

The short-term credit facility, meanwhile, will be used to facilitate the debt management of state enterprises under the Finance Ministry's responsibility, so that the cost and risks of public debts are kept low.

Financial markets are now highly volatile, resulting in higher borrowing costs for state enterprises when they negotiate for loans individually. As a result, the ministry wants to arrange the three-year credit facility on their behalf during this difficult period.

It is required by law to provide loan guarantees to state enterprises of no more than 20 per cent of the annual expenditure budget. In the current fiscal year, the figure is 16.9 per cent, nearing the statutory limit.

The short-term credit facility is aimed at providing adequate funds to state enterprises for investment projects and debt repayment.

The ministry will initially provide partial guarantees on this credit facility to ensure that the amounts do not exceed the legal limit.

Meanwhile, the Fiscal Policy Office is considering offering a tax incentive for employers to maintain their workforce.

Somchai Sajjapong, director of the office, said officials were studying whether tax measures would be helpful in slowing down rising unemployment.

For example, companies could be allowed to double their payroll expenses in terms of corporate tax deductibility during the economic slowdown, so that they might avoid or postpone lay-offs.

However, only companies in genuine distress would qualify for the additional tax exemption, and they would have to be registered with the Labour Ministry to verify their status.

"We are discussing this potential incentive. However, we have to be cautious when it comes to using fiscal measures because they affect our tax revenues," Somchai said.

"This year alone we could face a revenue shortfall of as much as Bt130 billion, so we have to ensure that there would be no abuse if we decided to offer the incentive," he said.

The Finance Ministry is also working on a savings system for about 20 million workers who are currently not covered by safety-net systems, he added.