50 years to pay off loans, Kittiratt says

The Finance Ministry has conceded for the first time it will take the government 50 years to repay the 2 trillion baht in borrowing aimed at overhauling the country's infrastructure that the cabinet approved yesterday.

  • Published: 20/03/2013 at 12:00 AM
  • Newspaper section: topstories

Finance Minister Kittiratt Na-Ranong and chief Democrat Party critic Korn Chatikavanij in a rare, light moment as political battle lines form over the huge loan proposal. (Photo by Patipat Janthong)

Deputy Prime Minister and Finance Minister Kittiratt Na-Ranong said on Tuesday that the loans, which will be sought from domestic and international financial sources, will put Thailand's public debt at less than 50% of gross domestic product (GDP), a level that will not harm fiscal discipline. Repayment is planned over 50 years.

"We're quite sure that all of the debts will be repaid before 50 years because the projects can boost the economy and the country's competitiveness in the long run," Mr Kittiratt said.

"The infrastructure and assets funded by the loans, however, will exist for the country for some 100 years," he said.

According to the repayment plan, only interest will be repaid during the first 10 years.

The principal repayment will start from the 11th year with 1% or 20 billion baht of the principal to be repaid between the 11th and 19th years, 2% between the 20th and 30th years, 3% between 31st and 40th years and 4% between the 41st and 50th years.

The projects funded by the loans will come under tough scrutiny based on the benchmark prices set by the Finance Ministry and procurement regulations of the Prime Minister's Office to ensure transparency, Mr Kittiratt said.

The finance minister insisted the government needs to borrow because the annual budget is not sufficient to fund the megaprojects while Thailand has lacked massive investments in infrastructure for many years.

The investment will boost GDP by 1% a year on top of estimated annual economic growth of around 5-6%, and create 500,000 jobs, he said.

Prime Minister Yingluck Shinawatra confirmed that strict regulations and follow-up committees will ensure transparency in the 2-trillion-baht spending. She also said the spending would create national assets including high-speed trains and roads.

Transport Minister Chadchat Sittipunt said all the projects are based on the government's three strategies _ shifting Thailand's logistics from road to rail systems, linking the centre of each region to neighbouring countries, and building infrastructure to serve main economic areas in the provinces.

PM's Office Minister Varathep Rattanakorn said the government will submit the bill to parliament today for deliberation next week.

Opposition and Democrat leader Abhisit Vejjajiva reiterated his opposition to the bill, saying the legislation will put a heavy debt burden on the country.

The ruling Pheu Thai Party had promised not to borrow during its election campaign but it was doing just the opposite now, he said.

Although the government plans to borrow mainly from local sources, Mr Abhisit still envisaged possible negative impacts from the government's dependence on domestic funds.

"Local borrowing means competition for loans with other parties which also need local loans. If there is high demand for loans and limited money to lend, interest rates will rise," Mr Abhisit said.

Mr Kittiratt dismissed Mr Abhisit's concern saying that the local money market has more than 2 trillion baht in liquidity while the government's investments each year will come to only 300 billion baht.

Chairman of the Board of Trade of Thailand Pongsak Assakul backed the 2-trillion-baht borrowing programme. He said the infrastructure projects will cut logistic costs and enhance the competitiveness of Thai business operators.

Mr Pongsak said the borrowing for the investment will allow Thailand to develop and it will not cause public debt to exceed 50% of the GDP, so should not pose a problem.

In another development, the cabinet yesterday endorsed the terms of reference for water management and flood prevention projects worth 340 billion baht. Six groups of qualified contenders are required to tender their technical proposals and bids by May 3.

The projects include the construction of reservoirs, flood prevention structures, water retention facilities, improvement of waterways and floodways and the creation of an integrated water information and forecasting centre.

Other projects are the construction of the controversial Kaeng Sue Ten dam in Phrae and two floodways along both sides of the Chao Phraya River.

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