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AGRICULTURE
WICHIT CHANTANUSORNSIRI and PHUSADEE ARUNMAS
The Finance Ministry's plan to propose 110 billion baht for rice mortgage programmes is scheduled to go before the cabinet for approval today.The pledging programmes will be administered by the state-owned Bank for Agriculture and Agricultural Co-operatives (BAAC) with loans from Krung Thai Bank, the Government Savings Bank, Siam City Bank and TMB Bank backed by the ministry.
The suggested interest rate is the minimum lending rate (MLR) minus two percentage points. The final rate has not yet been decided, but will probably be based on that of Krung Thai Bank.
This is the first time in the history of the rice-buying scheme that state banks will finance the plan instead of the BAAC. This is partially because the government has obligations of 40 billion baht outstanding to the BAAC due to delays in repayments, affecting the state bank's ability to support lending to farmers and rural communities under other development programmes.
In the past, the BAAC financed the upfront costs and sought reimbursement later from the government, which settled its obligations using revenues gained from the sale of government rice stocks accumulated from the mortgage programme.
Deputy Finance Minister Pradit Phataraprasit said the pledging programme needs to proceed despite losses over the last three to five years, as farmers are the key food and energy crop producers and play a key part in the country's economic system.
Of the planned budget of 110 billion baht, 97 billion would be allocated to buy 8.5 million tonnes of paddy from the main 2008-09 crop, with the remaining budget slated to pledge corn and cassava.
Krung Thai Bank president Apisak Tantivorawong said it would be held responsible for lending 40 billion baht, with 40 billion baht from the GSB, and 15 billion each from TMB and SCIB.
GSB president Lersuk Chuladesa said the bank is ready to extend more loans to the pledging schemes if it is solicited by the government.
The bank would move investments in the capital market worth a total of 240 billion baht.
The GSB invested its excess liquidity in the repurchase market, which offers interest rates of only 3.75%, much lower than those of the pledging programme, he said.
According to Mr Pradit, the government expects to sell its existing rice stocks as soon as possible to repay debts. Since 2006, the government accumulated 4.3 million tonnes of milled rice through intervention schemes.
The government will focus on selling 3.1 million tonnes from state stockpiles, 2.1 million tonnes of milled rice from old stock and another one million from new rice the government recently bought from the second crop, said Commerce Minister Chaiya Sasomsab. The rice is slated for export.
Rice exporters will be asked tomorrow to propose directly to the ministry their volumes and prices.
Chookiat Ophaswongse, the president of the Thai Rice Exporters Association, said the purchase proposals by exporters were likely to be small, such as 100,000 tonnes, because the government's conditions for the rice sales call for each exporter to retain purchase prices for 30 days, making them highly subject to price fluctuation risks.
Normally, exporters take only two to three days to settle prices through the bidding process.
Mr Pradit said the government's buying scheme would target small-scale farmers and the budget would cap payouts at 500,000 baht per farmer.
Pongpanu Svetarunda, the director-general of the ministry's Public Debt Management Office, said the financing scheme will be immediately booked as public debt.
At the end of August this year, the country carried public debt totalling 3.4 trillion baht, representing 35.5% of gross domestic product (GDP).
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