The Finance Ministry is considering issuing bonds in international markets to establish a benchmark for the nation and to attract foreign investors, marking a significant departure from three decades of policy.
According to Deputy Finance Minister Julapun Amornvivat, Prime Minister Srettha Thavisin asked the Public Debt Management Office (PDMO) to consider a plan for issuing foreign bonds to create a benchmark for the private sector in raising foreign capital.
"The prime minister suggested we should explore foreign markets to establish a benchmark to the private sector because we haven't entered foreign markets for the past 30 years. We need to secure our position on the global stage. Mr Srettha recently travelled abroad to attract foreign investments," Mr Julapun said.
He said that although the plan to raise capital in foreign markets aims to test the market, he believes Thailand can sell any foreign bonds issued.
The ministry has yet to decide when the bonds would be sold, by how much and in what currency, said Mr Julapun.
"In issuing such bonds, we need to determine the appropriate timing and take into account various factors, especially the interest rate differentials btween Thailand and foreign markets to avoid having negative effects on the Thai economy," he said.
In the fiscal 2024 budget, the PDMO plans to issue sustainability-linked bonds worth US$2 billion, or around 70 billion baht, with investors already expressing strong interest.
Addressing concerns about higher government borrowing costs due to rising interest rates, Mr Julapun acknowledged the gradual increase in the borrowing costs, following the trends of global market interest rates and policy rates. The average cost of government borrowing is expected to increase from 2.66% to 3%.
In recent years, the government’s borrowing costs have been low as interest rates in the market have stayed relatively low for a long time. However, the market interest rates have increased in recent times, leading to an increase in government borrowing costs. This inevitably affects both government borrowing costs and private sector borrowing costs, Mr Julapun said.
As of the end of August this year, the government’s public debt stood at 11.0 trillion baht, accounting for 61.8% of gross domestic product (GDP). About 81.8% of the public debt, totalling 9 trillion baht, was directly borrowed by the government.
The Thai government issued emergency loan decrees tallying 1.5 trillion baht to remedy the negative effects of the coronavirus pandemic in 2020 and 2021.
This caused the government’s public debt to rise from 40% before the pandemic to over 60%, exceeding the statutory limit set by the State Fiscal and Financial Discipline Act, requiring the Prayut Chan-o-cha administration to seek cabinet approval to increase the public debt limit to not more than 70% of GDP.