Soaring public debt caused by the rice pledging scheme will destabilise the currency and dampen confidence in the economy, former Bank of Thailand governor MR Pridiyathorn Devakula said yesterday.
MRPridiyathorn: ‘A dangerous road’
The government has showed no sign of reconsidering the policy, MR Pridiyathorn said, renewing his warning about the scheme's dangers.
A sharp increase in public debt would be needed to finance the scheme and cover losses, MR Pridiyathorn said.
Public debt stood at 44% of gross domestic product (GDP) at the end of July and is expected to rise to 48% by the end of this year, he said.
The former deputy prime minister and finance minister projected the debt per GDP ratio will jump to 53% in 2019.
''Rising debt will inevitably affect the currency stability,'' MR Pridiyathorn told a forum organised by the Isra Institute and the Thailand Development Research Institute (TDRI).
The baht will weaken due to low confidence in Thailand's climbing debt, he said.
The Pheu Thai Party pledges to buy paddy from farmers at higher than market prices. The government will pay 15,000 baht per tonne for white rice, and 20,000 baht for Hom Mali.
The government also bears the cost of stocking rice and other operations.
Global prices of rice hover around US$500 (19,500 baht) a tonne but the government has to sell it at $800 to cover the cost if paddy is purchased at 15,000 baht, said TDRI researcher Niphon Poapongsakorn.
MR Pridiyathorn predicted the scheme will incur losses of 140 billion baht from buying 21 million tonnes of paddy this year. He said the losses will increase to 210 billion baht over the next seven years as it had promised to buy 33 million tonnes per year starting next year.
No governments in the past have initiated any single project which could lead to trillions of baht in damage as this one could, he said.
The rice scheme could ''crumble'' the country, MR Pridiyathorn said.
Mr Niphon said the government will struggle to sell the rice at its inflated price under the scheme.
The government plans to store the unsold rice until it can be sold for a price that covers the cost.
But Mr Niphon said that long-term storage of the rice could reduce its quality along with its price.
Commerce Minister Boonsong Teriyapirom has said 7 million tonnes of rice has been sold under government-to-government deals with four countries, but he has declined to give further details.
Mr Niphon challenged the minister to unveil the price under the contracts for the sake of transparency, and to end public doubt about the efficiency of the scheme.
Mr Boonsong declined to meet his critics at the forum and refused to send officials responsible for the scheme to defend it yesterday.
Advocates of the scheme have praised it for pulling rice farmers out of poverty thanks to the high prices, but Siriluksana Khoman, an adviser to the National Anti-Corruption Commission, said the scheme is vulnerable to corruption.