New bid to bridge rice gap

New bid to bridge rice gap

Banks asked to finance payments to farmers

The Finance Ministry's Public Debt Management Office (PDMO) is preparing to seek bridge financing from local banks to meet payments to unpaid rice farmers within one month.

The PDMO plans to secure bridge loans in phases from banks before issuing the Bank for Agriculture and Agricultural Cooperatives' (BAAC) with bonds to be guaranteed by the Finance Ministry to pay for the financing, said Suwit Rojanavanich, a bond market adviser to the office.

The PDMO is waiting for an official letter from the Council of State for its opinion concerning the legitimacy of using borrowing of 130 billion baht to pay farmers who pledged their paddy under the cash-strapped rice-pledging scheme for the 2013-14 main crop.

The Council of State initially indicated that the caretaker government could proceed with the borrowing plan as it would be transferred from a budget earlier set for infrastructure investment and would not represent new debt.

Late payment to rice farmers has become a hot potato for the Pheu Thai-led government as it could lose support from its base voters. Some have already staged protests.

Since the start of the 2013-14 main crop in October, farmers have pledged about 10 million tonnes of paddy under the scheme, but only 50 billion baht has been paid to farmers who have sold 3.5 million tonnes of paddy.

Deja Tulananda, executive vice-chairman of Bangkok Bank, said the bank has not received any official letter from the authority about the borrowing. However, the bank is willing to join bidding for bridge loans if the borrowing is proved to be legal, he said.

Plakorn Wanglee, senior executive vice-president and head of wholesale banking at Standard Chartered Bank (Thai), said the bank needs to study details of the 130-billion-baht borrowing plan prudentially. The project's risk is the bank's main focus, though such borrowing would be guaranteed by the Finance Ministry.

The government plans to call a general auction for its rice stocks early next month as its sales through government-to-government deals have been stalled after the National Anti-Corruption Commission (NACC) ruled a couple of weeks ago that rice sales via such contracts by the Commerce Ministry were not transparent.

Exact volumes and types of rice stocks to be put into the auction are yet to be disclosed, but a source from the Foreign Trade Department said a target should be 500,000 to 1 million tonnes this year.

Korbsook Iamsuri, president of Thai Rice Exporters Association, said the government from the outset should accelerate rice sales through auction but it will be impossible to get relatively high prices.

The source said the Council of State has resubmitted a letter to the government saying it can proceed with plans to borrow 130 billion baht as the plan was approved by the cabinet on Sept 3 before the House was dissolved.

The source said the government has already started the borrowing process with banks including the Government Savings Bank, but it has yet to announce details of the plan for fear of protests. The government expected to complete the borrowing in one week.

Do you like the content of this article?
COMMENT (4)