1997 crisis debt to be repaid over 20-30 years

The principal of the 1.14-trillion-baht debt from the 1997 crisis bail outs will start to be paid down under a new plan.


Read previous articles on this issue: #1 (12/11/2010) and  #2 (1/12/2010).

In a related story today: "The Thai Asset Management Corp plans to sell off its remaining 63 billion baht worth of dud assets before its closure in June this year." (See article: TAMC to hold fire sale)

Click button to listen to FIDF Deal and rightclick to download

FIDF deal possible next week

bank vaultThe Bank of Thailand board hopes to reach a conclusion with the Finance Ministry next week on how to deal with the 1.14-trillion-baht debt incurred from buying bad assets from financial institutions during the 1997 financial crisis, says chairman of the BoT board, M. R. Chatumongkol Sonakul.

He said the central bank will call a meeting with Finance permanent secretary Areepong Bhoocha-oom to explore their options.

During the 1997 crisis, the Financial Institutions Development Fund (FIDF) bailed out several banks and finance companies which suddenly became debt-ridden after the baht had been floated by issuing bonds.

The central bank has since been responsible for repaying the principal of the bonds whenever it makes profit and the Finance Ministry has paid the coupon.

In recent years, however, the central bank has not made much profit and the ministry has become increasingly irritated by the huge amount to interest it had to pay each year, at 60 billion baht last year.

Late last year, both agreed to solve the issue by transferring the FIDF's assets to the ministry to help clear some of the principal. However, both have yet to appraise the assets.

They are now working on drafting the fund-closing bill and seeking a consensus on asset appraisals.

Actually, both issues [asset evaluation and the draft] are taxpayers' money transferred between two pockets. Personally, I don't think any dispute should arise. We should settle on a solution that benefit the people the most, even though one of us stands to lose," said M. R. Chatumongkol.

Since consolidating the central bank's reserve and currency accounts is not possible, the focus should be on amending the Bank of Thailand Act and Currency Act to allow the central bank to use the yields from currency reserves to clear the principal of the debts.

Currently, the currency reserve stands at 36 billion baht.

The debt is huge and we can't say it's all the central bank's burden because during the crisis we agreed to create this debt in order to revive the economy. Therefore, we can't expect to clear [the debt] in five or seven years. If we work on the law amendments, I think we could clear the debts in 20-30 years from now and then we need to issue new longer-term bonds to match the repayment period," said M. R. Chatumongkol.

Commenting on the overall economy, the former Bank of Thailand governor agreed with the BoT's policy to focus on taming inflation in line with the regional trend because high inflation would disrupt the economic growth in the long term.

He added that the depreciating Thai baht would benefit the export sector, which will in turn help maintain the economic expansion, even though it will add to inflationary pressures.

As always, the re-emergence of political conflicts will add to the risks.

(Source: Bangkok Post, business section, FIDF deal possible next week, 26/01/2011, link)

Financial Institutions Development Fund (FIDF) - a fund managed by the Bank of Thailand that played a key role in rescuing failing financial institutions after the 1997 crisis

Bank of Thailand (BoT) - Thailand's central bank (Read description at Mahidol University)
central bank - the government's bank that controls all the other banks in a country, sets monetary policy, maintains the stability of the national currency and money supply, sets interest rates and inflation targets, saves failing banks as a lender of last resort during times of financial crisis (See Wikipedia)

Asset Management Companies (AMCs) -
special companies with special rights to deal with "significant banking sector problems," also known as "debt-management companies" (See 2004 ADB paper and ADB book)
dud - 1. something that fails to work or function, 2. a bomb that fails to explode
fire sale - sale or even at which goods are sold at very low prices (very cheap, good deals)

board - board of directors, the group of people elected by the stock shareholders of a corporation to oversee the operation of a corporation at a very high level (See Wikipedia)
conclusion - a final decision การสรุป การตกลงขั้นสุดท้าย

debt - an amount of money that you owe หนี้
ridden - has a lot of something bad (guilt ridden about the kids, flea ridden blanket, debt-ridden company, for example)
debt-ridden - when a person has much too much debt
incur debt - when an individual or company adds debt (liabilities) to their balance sheet
assets - things owned, sucha as stocks, bonds, real estate, loans to others, or money สินทรัพย์

institutions - large and important organizations, such as universities or banks สถาบัน
financial institution - a company that provides financial services to individuals and companies (See Wikipedia)
finance - to provide money for something จัดหาเงินทุนให้
finance company - a financial institution that makes loans to individuals and businesses to pay for purchases repayable in installments, not a bank so not subject to the strict regulations of a bank
crisis - an urgent, difficult or dangerous situation วิกฤตการณ์

central bank - a raised area of land along the side of a river ริมฝั่งแม่น้ำ
options - possible choices, the different things that someone can choose to do ทางเลือก
explore options - look at and evaluate possible choices (before actually choosing one)

bail out - pay money to help someone else get out of a problem

floating exchange rate - an exchange rate between two currencies that goes up and down with supply and demand
fixed exchange rate - an exchange rate between two currencies that is always the same value (this forces an adjustment to happen elsewhere in the current account (exports - imports) and capital account (investment money flowing into or out of a country)
baht had been floated - the baht went from having a fixed exchange rate (against the US dollar) to have a floating exchange rate

bond -
a formal contract to repay borrowed money with interest at fixed intervals, a paper certificate is issued much like a stock certificate (See Wikipedia)  พันธบัตร
issuing - officially giving something to people ออกคำสั่ง
issuing bonds - sell a new set of bonds for the first time

principal - the amount of money borrowed in a loan that must be paid back to the lender เงินต้น
clear the principal - paying back all of the money that was borrowed, pay back all of the principal of the loan (and thus reducing interest payments to zero)
clear the principal of the debts - same as above
clear some of the principal - same as above
repay the principal of the bonds - same as above
pay down the principal -
same as above
profit - money that you make from selling goods and services after all your costs have been paid กำไร
coupon - coupon of a bond, the rate of interest to a bond owner, "the amount of interest paid per year expressed as a percentage of the face value of the bond" (See Wikipedia)

ministry - a government department dealing with an area of activity กระทรวง
irritated - annoyed รำคาญ, หงุดหงิด
interest - payments made for the use of another's money for a period of time
issue - a problem that needs to be discussed and dealt with ประเด็น
solve the issue - solve a problem that needs to be discussed and dealt with
transfer -
give from one person or oranization to another, change ownership to another person or organization,  move from one person or organisation to another โอน
1997 economic crisis -
1997 Asian financial crisis (See Wikipedia)

asset - something owned by a person, company etc., particularly money and property ทรัพย์สิน
appraise - find the value of something
appraise asset -
find the value of an asset
asset appraisal - the value of an asset

draft - written for consideration, but not yet in its final form, likely to be changed ฉบับร่าง
fund - money collected or gathered together to spend on something เงินทุน กองทุน
bill - a written document containing a proposal for a new law ญัตติ
consensus - a generally accepted agreement or decision among a group of people ความคิดเห็นของคนส่วนใหญ่

taxpayers' money transferred between two pockets - meaning: 1. all the government's money is really the people's money, 2. so it doesn't really matter which government agencykeeeps the money or spends the money
dispute - a serious disagreement, fight, conflict, argument การโต้เถียง, ความขัดแย้ง, ข้อพิพาท
settle - to reach a decision or an agreement about something, or to end a disagreement แก้ปัญหา
benefit - to help someone มีประโยชน์ต่อ
 
reserve - something currently not being used but that can be used when needed สำรองไว้ ที่จัดสรรไว้
currency - a widely used the money accepted for exchange of goods in an economy เงินตรา (See Wikipedia)
currency reserves - foreign currencies kept by a country's central bank

account
- where money is kept in a company's recordkeeping and accounting system
focus - the one or small number of things they work on hard to achieve (rather than try to do a million things and achieve nothing) ให้ความสำคัญ
amending - making changes to a document, law, agreement, etc. การแก้ไขกฎหมาย
yields
- profit, money that is made from some activity or from some asset or investment

burden - a serious or difficult responsibility that you have to deal with ภาระ (See glossary)
revive - bring back to life again, to come or bring something back to life, health, existence, or use ทำให้ฟื้นชีพ
issue new longer-term bonds to match the repayment period - the bailout money that will be repaid over a long period (20-30 years) is financed by bonds that have a life of the same period of time 

policy - a plan of action to guide decisions and achieve outcomes (See Wikipedia)
inflation - the level of prices rising in the economy as a whole (See The Economist glossary) ภาวะเงินเฟ้อ
taming inflation - controlling and limiting inflation to a low level
in
line with - following, matching and agreeing with
trend - a gradual change over time such moving upwards or downwards or not changing at all (flat trend) ทิศทาง แนวโน้ม
regional trend - the general direction of change in the region as a whole (here: the ASEAN or Southeast Asian region which includes Thailand's neighbors)
disrupt - cause difficulties for some activity and prevent it from continuing as usual or as expected ทำให้ยุ่งเหยิง, ทำให้ยุ่งยาก ทำให้เสียกระบวน, ทำให้เสียระบบ, ทำให้สับสน

depreciating - when a currency loses its value and becomes cheaper (this makes the countries exports cheaper) การลดลงของค่าเงิน
sector - a part of the economy ภาคเศรษฐกิจของประเทศ (public sector = government, private sector = all businesses, household sector = families and consumers, banking sector,...) (See Wikipedia)
export sector - the part of the economy that produces goods and agricultural commodities for export, all the businesses that do this 
maintain
- to keep something happening, to make it continue happening, prevent it from stopping
expansion - when something increases in size, number or importance การขยายออก
emergence - the process of appearing การปรากฎออกมา
re-emergence - the process of appearing again (after already appearing before)
conflicts - angry disagreements and fighting between people or groups ความขัดแย้ง

About the author

columnist
Writer: Jon Fernquest
Position: Online Writer