Govt mulls over paying for new railway in dollars

Govt mulls over paying for new railway in dollars

Central bank agrees, provided Thailand takes loans in foreign currency so it can control fluctuations

The cabinet is expected on Tuesday to approve a proposal to pay for the Bangkok-Nakhon Ratchasima high-speed railway in US dollars in line with a recommendation from China.

The bill worth 50 billion baht will cover the costs listed under Contract 2.3, which involves the purchase of tracks, an electricity system and machinery, as well as procuring train carriages and training staff.

"Cabinet members covering the sector resolved to make the payment in US currency," Transport Minister Saksayam Chidchob said after a recent meeting on the 253-kilometre electric rail system.

Initially, officials were reluctant to agree to their Chinese counterparts' suggestion the payment be made in US dollars, believing that paying in baht would benefit both countries.

However, Mr Saksayam said, the Bank of Thailand (BoT) is fine with paying in the US currency, provided the government seeks loans in dollars so it can fix forward rates to deal with fluctuations in the currency.

The meeting agreed with the BoT and is also okay with a plan to cover 85% of the costs under Contract 2.3 with domestic loans at interest rates of between 1.5% and 1.6%, he said.

The cabinet will give its final say to the payment plan on Tuesday.

Meanwhile, Prime Minister Prayut Chan-o-cha and Chinese PM Li Keqiang want to speed up talks on Contract 2.3, especially since little progress has been made for about a year due mainly to some financial details and Bangkok's disagreement with a one-year warranty period as proposed by the Beijing officials.

Mr Saksayam, whose ministry is preparing to hold the 28th talk of Thai-Chinese Joint Committee, is optimistic all issues under dispute can be settled.

Construction of some sections of the ambitious rail route, part of a larger rail development network linking Thailand, Laos and southern China, has started.

The Bangkok-Nakhon Ratchasima route alone will cost 230 billion baht.

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