Repayment of infrastructure loans 'to take 50 years'
The Public Debt Management Office estimates that the country will need 50 years to completely repay the Bt2-trillion loan the government plans to take out to finance infrastructure construction for seven years.The huge loan will also raise the country's public debt level to over 50 per cent of GDP.
Chularat Suteethorn, director-general of the PDMO, said last week that the debt payment plan, which would be submitted to the Cabinet for approval soon, will require the government to allocate a budget equivalent to 2-3 per cent of the Bt2-trillion loan to service it every year. Amortisation of the loan principal would not start until the 11th year.
The government is drafting the bill to allow it to borrow the Bt2 trillion. It has to borrow a total of Bt2.2 trillion by 2020. The PDMO anticipates that the bill would be approved by Parliament and about Bt10 billion of borrowing would be made in the first year.
The borrowing will peak at Bt400 billion-Bt500 billion in 2016 or 2017, then gradually decline. The public debt level will also peak in 2016 and 2017, which is in line with the surge of the government's borrowing.
Regarding a separate water management plan that would need Bt340 billion, the PDMO has already discussed the matter with the government's Water and Flood Management Committee and agreed that the investment would be Bt40 billion-Bt60 billion annually. The committee is now considering the water management project, which should take until next month. The loan contract is expected to be signed in June.
"The borrowing will be made annually along with the actual expenditures on the project. We will submit the document to financial institutions to commit ourselves to the borrowing of such an amount and ask them to propose the interest rate and conditions. The PDMO will draw down Bt30 billion from the loan for spending on urgent projects," she said.
The country's liquidity is now plentiful and will be able to serve the government's debt demands without squeezing out the private sector. The PDMO has issued many kinds of bonds every year. It might issue savings, zero coupon or amortising bonds with a maturity of 30-50 years.
The country's recent ratings upgrade by Fitch Rating will help the government implement its capital mobilisation plan at a lower cost. The two major factors behind the upgrade are improved political stability and low inflation, which runs about 3 per cent per year on average.