Draft bill clarifies public debt status
1997 bailout fund still comes under heading
Debt incurred by the Financial Institutions Development Fund (FIDF) for bailing out troubled financial institutions during the 1997 financial crisis will still count as public debt under a draft bill on public debt, since the debt resulted from fiscal operations.
The rescue fund's legal entity is separate from the Bank of Thailand and has a status as a state enterprise, so the FIDF's borrowing is considered public debt, said Theeraj Athanavanich, a bond market adviser to the Public Debt Management Office (PDMO).
The draft bill will land on the National Legislative Assembly's agenda for reading after the Council of State completes its interpretation.
Mr Theeraj said the central bank's debt will not be included in public debt, even though the Bank of Thailand's status changed to a state agency under the central bank law amended in 2008.
The draft bill on public debt clearly states that the central bank's debt was incurred through monetary operations such as bond issuance and financial liquidity absorption.
Excluding the central bank's debt from public debt is in line with practices in most major economies, Mr Theeraj said.
But the PDMO will report the Bank of Thailand's debt in the notice of public debt on a monthly basis to reveal the full details of the country's debt, he said.
At the end of May, the central bank's debt was 4.26 trillion baht. Public debt totalled 6.35 trillion, representing 42.9% of the Thailand's GDP.
Of the total public debt, 95% was local debt and 4.99% was foreign-denominated debt. In terms of maturity, 85.7% was long-term debt and the rest short-term.
Mr Theeraj said the draft bill on public debt amends three major aspects: definition, public debt supervision and investment by the Domestic Bond Market Development Fund.
The new bill says the debt of the central bank and that of state-owned financial institutions not guaranteed by the Finance Ministry will not count as public debt.
Moreover, the debt of state enterprises' subsidiaries will not be considered public debt.
The amended bill will allow the State Enterprise Policy Office to take part in considering state enterprises' borrowing and debt management plans in order to improve efficiency and align with operating plans.
The bill will also authorise the PDMO to analyse and monitor the debt of the Bank of Thailand and state-owned financial institutions.
The draft will broaden investment options for the Domestic Bond Market Development Fund by letting the fund put money into Bank of Thailand debt instruments.
At present, the PDMO is allowed to borrow money before budget disbursement is due and the Domestic Bond Market Development Fund can use it to invest, but options are restricted.