The government is weighing a plan to raise about $1 billion from the global market via what would be the country’s first foreign-currency sovereign bond sale in two decades.
The Ministry of Finance aims to wrap up a cost-benefit analysis and other steps for the offering for the government to take a decision by May, according to Patchara Anuntasilpa, director-general of the Public Debt Management Office.
Such a deal is meant to provide a benchmark for Thai companies tapping the overseas markets for their funding, he said.
Authorities have preferred raising the billions of dollars required annually to bridge a budget gap and fund investments locally because of low interest rates. In 2022, the debt office shelved a planned dollar bond offering partly due to market volatility.
But Prime Minister Srettha Thavisin, who took office six months ago, has pitched for overseas bond sales to allow global funds to finance sustainable projects.
“The most likely choice will be dollar-denominated bonds as it’s a widely used currency and benchmark,” Mr Patchara said in an interview on Wednesday.
Deputy Finance Minister Julapun Amornvivat said last month that authorities were carefully evaluating the sale of notes denominated in dollars, yen or yuan with a target to issue them over the next one to two years.
While the borrowing cost of dollar-priced bonds will be higher, it would be cheaper or on par with local costs if they are denominated in yen or yuan, he said.
10-year US Treasury notes carry a yield of about 4.24%, compared with 2.55% for similar tenor sovereign baht notes and 2.43% on yuan-priced Chinese government bonds. The all-in-cost of bond issuance by Thailand in any currency including in yen will be higher than local rates as it will include foreign exchange and other fees, Mr Patchara said.
“It’s very challenging as the funding cost locally is cheaper and more convenient, so we need to convince people why we need to do it the hard way,” he said. “We should still go ahead with the plan to set a benchmark for the nation.”
The proceeds from any international bond sale will likely go to finance sustainability-linked projects as they add value to the economy, Mr Patchara said.
Currently, foreign-currency debt accounts for only 1.8% of total Thai government debt, mostly in the form of loans from multilateral agencies. State borrowing is estimated at 2.4 trillion baht in the fiscal year that began on Oct 1, 2023.