The caretaker government is again desperately seeking fresh funds to pay its overdue debt to rice farmers, as 2-3 billion of the 20-billion-baht budget plus income from recent rice sales is expected to be paid out in the coming days.
Rice farmers gather in front of BAAC headquarters recently to protest against the government’s delayed ricepledging payments. Hundreds of thousands of rice farmers are still waiting to be paid. (Photo by Seksan Rojjanaametakul)
In a last ditch effort, the state-owned Bank for Agriculture and Agricultural Cooperatives (BAAC) looks set to use 10 billion baht in proceeds it hopes to raise for its three funds that were established for overdue payments to rice farmers once the leftover amount is paid, said a source at the bank.
The BAAC intends to raise the contribution to its three funds to 10 billion baht this month by approaching cash-rich local administrative organisations for deposits to the funds, the source said.
Among the three funds — one for donation to farmers and the other two offering 0.62% annual interest and no interest — 4.79 billion baht was raised as of last Friday. The BAAC has already spent 1.5 billion baht from the funds for advance payments to farmers.
Of the total, 3.93 billion baht was contributed to the interest fund, 835 million to the interest-free fund and 24.3 million to the donation fund.
The Yingluck Shinawatra government is months behind in payments to farmers, who are owed 90 billion baht for rice pledges.
The government's caretaker status prohibits it from borrowing, while Commerce Ministry rice sales have been insufficient in raising enough proceeds to immediately pay off the farmers.
More than 1 million farmers pledged paddy worth 190 billion baht for the 2013-14 main crop ending on Feb 28, but only about 100 billion has been paid to them so far.
Borrowing would be the fastest method to help the government pay off farmers, but the Finance Ministry's efforts to borrow from financial institutions and even state enterprises have failed several times, as lenders were concerned about the legitimacy of borrowing by a caretaker government.
The scheme has been slammed for corruption and massive losses, as prices were set 40-50% above the market.
The government bet that piling up a large supply in state warehouses would boost global rice prices, but the policy has backfired spectacularly, as rice has flooded the global market since the scheme was implemented in October 2011.
This has left Thailand with a record stockpile, while the country has relinquished its crown as top rice exporter to India.
The source said rice sales could be the only source of proceeds to pay farmers without the contribution from these three funds if the Election Commission (EC) forbids the caretaker government from using the additional 40 billion baht from the central budget to advance payments to farmers.
The BAAC earlier estimated the last rice farmer to receive a pledging payment would still receive it this year even if the government could not borrow money to pay off the overdue debt.
The Finance Ministry will seek EC approval for new borrowing from the central budget, but a meeting date has not been set.