PDMO still upbeat on impact of pledging schemes

The Public Debt Management Office (PDMO) is confident that losses from various crop intervention schemes will not greatly affect the level of public debt over the next seven years.

Critics have voiced concern that the annual borrowing of 400 billion baht to intervene in the market of cash crops such as rice, cassava and maize could damage the state budget significantly.

For the season ended this past September, the Finance Ministry expects 70 billion baht in losses from crop pledging schemes, mainly for rice.

PDMO director-general Chularat Sutheethorn said if the losses stay at an average of 100 billion baht a year, then the ceiling of public debt will not exceed 50% of gross domestic product (GDP) in the next seven years.

In the past year, 350 billion baht was used to buy paddy in unlimited amounts for 15,000 baht a tonne, about 40% higher than the price before the scheme started.

For this crop year starting in October 2012, the government plans to use less than 400 billion baht for paddy pledging, of which 265 billion will come from rice sold by the Commerce Ministry and the rest from state-guaranteed loans.

Ms Chularat said outstanding debt as of Oct 31 was 4.82 trillion baht,or 43.3% of GDP.

The agency predicts the ratio of public debt to GDP will peak at 49.9% in 2016 and gradually decline to 46.1% in 2019.

The near-term rise will stem mainly from 2.2 trillion baht in infrastructure spending and 350 billion for water management projects.

Still, even the peak of public debt will remain below the discipline level of 60%.

A government source said losses from rice pledging may not have a serious impact on the public debt, as the losses and interest burdens of the scheme will be booked as state expenses, lessening expenditure on other state programmes.

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Writer: Wichit Chantanusornsiri
Position: Business Reporter