Repaying rice scheme debt to take 7yrs

Repaying rice scheme debt to take 7yrs

Paying off the 705 billion baht debt incurred by the Pheu Thai Party-led government's rice-pledging scheme will take around seven fiscal years if the governments pays a flat amount of 131.3 billion baht each year, the state-backed farm bank's chief says.

A farmer in Phitsanulok rushes to harvest paddy before floods arrive. Heavy rain in recent weeks caused flash flooding in several northern provinces. TAWEECHAI TAWATPAKORN

The government has set aside 71.3 billion baht in the 2015 budget and another 60 billion baht from selling stockpiled rice to pay the debt for next fiscal year, starting from Oct 1, said Luck Wajananawat, president of the Bank for Agriculture and Agricultural Cooperatives (BAAC).

Of the total 71.3 billion baht, 36.9 billion will be used to pay principal and the rest is for interest.

The rice-subsidy scheme debt amounts to 755 billion baht, 705 billion incurred by Yingluck Shinawatra's administration alone and the remaining 50 billion from previous governments.

Luck: Spread-out payments best way

The scheme was a flagship populist policy of the Yingluck government, which set the pledging price 40-50% higher than the global price at 15,000 baht a tonne for paddy and 20,000 baht per tonne for Hom Mali fragrant rice. 

The rice-pledging scheme's idea was seen to kill two birds with one stone — putting money directly into farmers' pockets to stimulate the economy, and hoarding a large supply from the market in the hope of a higher price — but it backfired.

The scheme did indeed raise farmers' incomes but also encouraged them to run up debts, while the market price at that time was still low though a large supply was stored in warehouses.

Moreover, running the scheme for only five crops was estimated to cost taxpayers at least 400 billion baht.

Mr Luck said the interim government decided to stretch out payments rather than spend large amounts on short-term payments, as it does not want the debt payment to hurt the allocation of the investment budget.

Following many problems stemming from the rice-pledging scheme, the military-appointed interim government has a clear policy to help farmers in a sustainable way by pursuing measures to lower their operating costs and increase productivity.

He said settling the rice-pledging scheme's debt would also help to bring down the public debt level.

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