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.
About 50 billion baht will be needed to cover the costs listed under so-called 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 to review progress on the 253-kilometre rail line, for which planning began nearly five years ago.
Initially, Thai officials were reluctant to agree to their Chinese counterparts’ suggestion that the payment be made in 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 that it can fix forward rates to deal with fluctuations in the currency.
He said participants at the meeting agreed with the central bank and were also content 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%. The cabinet will have the final say on the payment plan on Tuesday.
The baht is currently trading at a six-year high against the US dollar. With a gain of 9% since the start of the year attributed to the country’s healthy current-account surplus, it has been the best-performing currency in the world against the greenback.
Prime Minister Prayut Chan-o-cha and Chinese PM Li Keqiang want to speed up talks on the rail contract, since little progress has been made over the past year. The main sticking points include some financial details and Bangkok’s view that the one-year warranty proposed by Beijing is too short.
Mr Saksayam, who is preparing for a 28th round of talks on the contract soon, says he is optimistic that all the issues in dispute can be settled.
Nearly five years after talks began, the only construction that has begun involves two short sections of 3.5 and 11 kilometres. The Bangkok-Nakhon Ratchasima route, part of a larger rail network linking Thailand, Laos and southern China, is expected to cost 230 billion baht in total.