Bridge loans to get payments to rice farmers back on track

Economy January 28, 2014 00:00

By Suphannee Pootpisut,

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PDMO to borrow in small batches to cover pledges by next month

Farmers can finally be paid for their crops next month after the Public Debt Management Office opens bidding to domestic financial institutions for funds to shore up the rice-pledging scheme. 
“We will gradually borrow in small batches of no more than Bt30 billion each. This is expected to reach farmers’ hands within one month from now,” Suwit Rojanavanich, an adviser for the PDMO, said yesterday.
The PDMO is waiting for formal advice from the Council of State on whether borrowing Bt130 billion for the scheme would contravene Article 181 of the Constitution. With the Council’s preliminary interpretation that the government can borrow for the scheme, the PDMO will take out short-term bridge loans from commercial banks, he said. 
Bidding for loans is the PDMO’s normal process to manage its financing costs.
“After borrowing from commercial banks, the PDMO will gather the proceeds to back the issuance of Bank for Agriculture and Agricultural Cooperatives bonds. The Finance Ministry will be the guarantor. That will later be converted into long-term debt,” Suwit said.
The PDMO has already guaranteed BAAC’s three-year, Bt32.59-billion bonds. The proceeds were used to refinance BAAC bonds that had matured and to prepay debt. 
The new bidding is the reopening of existing bonds with a 3.53-per-cent coupon rate. That is high compared with same-maturity government bonds, whose coupon rate is 2.77 per cent. The reopening allows the PDMO to gain a discount from the bidding, which allows this issue of bonds to carry a coupon rate of 3.14 per cent.
Commercial banks will have to wait for clear regulations before saying they will join the bidding.
Caretaker Finance Minister Kittiratt Na-Ranong said last weekend that his ministry would be the guarantor of the BAAC’s loans of Bt130 billion from commercial banks. The ministry will ask the 33 commercial banks in Thailand to join the bidding for loans of Bt130 billion.
Deja Tulananda, vice chairman of Bangkok Bank, said it had not received the request yet, but if the process is legal, the bank had no problem with considering joining the bidding.
Arthid Nanthawithaya, senior executive vice president of Siam Commercial Bank, said the issue would have to be carefully considered by the board of directors.
Plakorn Wanglee, senior executive vice president and head of wholesale banking at Standard Chartered Bank (Thai), said it would consider risk as a priority, but if the Finance Ministry is a guarantor, such a loan would be regarded as low-risk by commercial banks. However, Standard Chartered Thai has also not received the ministry’s request yet.
In a related development, Krungthai Bank president Vorapak Tanyawong insisted yesterday that the bank had not already approved a loan for the rice-pledging scheme. There was a rumour last week that KTB would lend more than Bt100 billion to fund the project. Vorapak said the bank’s board of directors had never considered this issue and that the government had never asked KTB for such a loan.