Public debt office allays concerns

Public debt office allays concerns

Higher interest rates not a potential risk

With most of the government's debt portfolio dominated by long-term bonds with fixed interest rates, there is less risk from the trend of rising interest rates globally, according to the Public Debt Management Office (PDMO).

PDMO director-general Patricia Mongkhonvanit admitted rising interest rates globally could eventually impact the government's financial resources.

However, as 82% of PDMO's debt portfolio is made up of long-term bonds with fixed interest rates, this reduces the risk for public debt management, said Mrs Patricia.

Over the last two years the office conducted massive borrowing, including a total of 1.5 trillion baht under two emergency loan decrees to mitigate the impact of the Covid-19 pandemic. Part of this borrowing was done through the issuance of promissory notes.

One incentive for the borrowing was the low interest rates in the local market.

The office is expected to restructure short-term debt to become long-term bonds with fixed interest rates, she said.

PDMO's planned bonds will have various terms, with a maximum term of 50 years, said Mrs Patricia.

Under the office's medium-term strategy for public debt management, at least 80% of its debt portfolio will have to comprise long-term bonds with fixed interest rates in order to reduce risk in public debt management, she said.

In fiscal 2022 PDMO plans to issue long-term bonds worth 1.1 trillion baht, compared with long-term bonds worth 846 billion baht issued the previous fiscal year. The average debt term is nine years and four months.

The government's total borrowing of 1.5 trillion baht led to a spike in the public debt to 9.64 trillion baht in December 2021, accounting for 59.6% of GDP. This amount rose from 6.9 trillion baht or 41.0% of GDP in 2019.

The economy contracted 6.1% in 2020. The Finance Ministry expects economic growth of 1.2% last year and 4% this year.

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