It could take at least five or six years to settle the estimated loss and interest burdens incurred from the Yingluck Shinawatra administration's flagship rice-pledging scheme, according to a Finance Ministry source.
A mill employee checks the quality of pledged rice kept in a warehouse in Ayutthaya province. (Photo by Thiti Wannamonth)
The Pheu Thai Party-led government borrowed 730 billion baht in loans carrying an average annual interest rate of 3% or 20 billion baht to fund the scheme for the five crops starting with the 2011-12 main crop.
Academics have estimated that losses from pledging rice at 40-50% higher than market prices could reach 500 billion baht.
Thailand must also shoulder a loss of another 100 billion baht from subsidising agricultural products before the Yingluck government.
Further delays in releasing stockpiled rice will add to the time it takes to settle the loss and interest burdens, the source said.
The source said about 150 billion baht in losses incurred from the rice subsidy has been rolled over each year.
The scheme was aimed at boosting rice farmers' income and driving domestic consumption. The government withheld a large amount of rice from the market in the hope the price would rise. The move backfired when supply from other countries flooded the market and put pressure on prices.
Moreover, the rollover of debt payment will limit the Finance Ministry's ability to guarantee state enterprises' borrowing. The Public Debt Management Act permits the ministry to back their borrowing up to 20% of annual expenditure.
In the 2014 fiscal year, the ministry's credit guarantee to state enterprises accounts for almost 10% of government expenditure, offering more room for a rollover of debt payment.
The country's public debt stands at 5.55 trillion baht, representing 46% of GDP. The ratio accelerated from 40.78% when Ms Yingluck took the helm in late 2011 and the rice scheme has been largely blamed.
Rice exporters estimated the government has kept 15-16 million tonnes of milled rice that accumulated from the scheme over the past three years. It may take up to three years to clear the huge stock even if the rice scheme is stopped to prevent new supplies entering state stocks.
Holding a large amount of stock and speedy exports by the Commerce Ministry in recent months to get quick cash to pay back the Finance Ministry have dampened Thai rice prices in the global market.
Based on May statistics from the Thai Rice Exporters Association, export prices of Thai rice were lower than those of competitors, with 5% white rice sold at US$390 per tonne compared with $405 for Vietnamese rice, $435 for Indian rice and $440 for Pakistani rice.
The association's president Charoen Laothamatas suggested authorities make a comprehensive stock check to classify the quality of grains kept in state warehouses.
Knowing the quantity and condition of rice could help the state outline sales plans more efficiently and increase rice prices, he said. More importantly, authorities may focus on the sale of newly harvested rice while managing the sale of old rice through auctions.