The caretaker government suffered a major setback yesterday when it failed to secure massive loans to pay farmers ahead of Sunday’s election. The government seeks loans to pay for crops farmers sold months ago under its flagship rice-pledging programme.
This bad news is likely to hit the ruling Pheu Thai Party hard at the ballot box, after many rice farmers threatened to boycott the election or vote against the party if they were not paid before the election.
Leaders of farmers’ groups from all over the country agreed yesterday to start protesting on the streets tomorrow if the government fails to settle what it owes to farmers by today, said Songpol Poonsawat, who represents farmers in Ang Thong.
“This is our response to the government’s failure to pay attention to our suffering. We farmers have been waiting for too long,” he said.
The government yesterday opened bidding for the first batch of Bt130 billion to be raised through short-term loans. Many of the 34 financial institutions invited by the Finance Ministry avoided the bidding, as there is no clarity on whether the lending would be legitimate.
A Finance Ministry source said it would open the next round of bidding for Bt40 billion in loans.
The next weekly bidding session is scheduled for Tuesday.
“Though some banks joined the bidding, high interest rates were offered, which included risks. This made the Public Debt Management Office [PDMO] cancel the bidding this time,” the source said.
Had the auction succeeded, farmers who mortgaged their paddy with the government under the scheme would have been paid by today, as the government claimed – two days ahead of the general election on Sunday.
As scheduled, the first batch of loans from financial institutions under the auction arranged by the PDMO for the Bank for Agriculture and Agricultural Cooperatives (BAAC) totalled Bt20 billion with a 15-year tenor. The open bidding will be made every Tuesday with offers to be submitted before 10am.
The bidding is part of the Bt130-billion funding that the caretaker government is seeking to pay off farmers. The PDMO designed a schedule to gradually borrow from financial institutions up to Bt30 billion a week via bidding until the total amount would reach Bt130 billion as needed.
The PDMO’s loan bidding arrangement came after the Council of State gave the opinion that the Finance Ministry could proceed with the Bt130- billion borrowing plan. The ministry had asked for legal advice on whether it was eligible to get that amount of loans as carrying loans.
Piti Tantakasem, chief wholesale banking officer of TMB Bank, insisted that the bank has not participated in the loan auctions for the BAAC because some legal issues needed further study, and the approval of the bank’s credit committee was needed.
Teeranun Srihong, co-president of Kasikornbank, cited the same reason, saying the bank did not join the bidding, as it could be not verified legally.
A source from the banking industry said banks had discussed among themselves by phone and agreed that the auction was not a suitable way of lending and that it could affect depositors’ trust.
However, the Finance Ministry reportedly threatened the banks with revoking their right to be the ministry’s primary dealer if they didn’t join the auction.
Despite the disappointment from the government’s aborted bridge-financing bidding, the Commerce Ministry has high hopes that foreign banks would be interested.
Caretaker Deputy Commerce Minister Yanyong Phuangrach said the state-owned banks’ employees were worrying too much about the lending. They should concern themselves more about the farmers who have been not yet been paid, and allow the banks to lend money.
“The government should be able to earn money and pay farmers as soon as possible, while it may consider not allowing state-run banks to join the rice-pledging project in the future,” he said.
Caretaker Commerce Minister Niwatthumrong Boonsongpaisan said seeking funds to support the rice-pledging scheme is the responsibility of the Finance Ministry, while the Commerce Ministry would accelerate selling rice from the state’s stockpiles to earn money to pay off the unpaid farmers for paddy pledged.
However, Niwatthumrong could not disclose how long it would take or how much money the ministry could make from rice releases to pay the farmers.
Wichian Phuanglamchiak, president of the Thai Agriculturist Association, has called on employees of government banks to be more sympathetic towards farmers, as millions of them have suffered from the delay in payment under the pledging scheme since October.
“Farmers are suffering tremendously from the late payment under the pledging scheme. We owe the BAAC, fertiliser and pesticide traders, the rice seed company and transportation companies for delivering rice to millers,” he said.
If the government banks do not care about farmers, the group of farmers will withdraw their money from those banks and will embargo government banks’ services, he said.