Reserves eyed for loans

Reserves eyed for loans

State wants treasury excess to finance aid

The Ministry of Finance is backing a proposed chance that would allow the government to drain the last 75 billion baht still held in reserve, and use it as 'soft loans' to needy businesses. (File photo)
The Ministry of Finance is backing a proposed chance that would allow the government to drain the last 75 billion baht still held in reserve, and use it as 'soft loans' to needy businesses. (File photo)

The Finance Ministry has proposed amending the law governing treasury reserves to allow the state to use excess reserves for soft loans to develop the country.

The amendment could pave the way for the Finance Ministry to become more efficient in using treasury reserves to help sectors that need financial assistance, said Theeraj Athanavanich, a bond market adviser to the Public Debt Management Office.

Surplus treasury reserves are typically required to be deposited at the Bank of Thailand without obtaining interest as the current law prohibits the government from using treasury reserves for other purposes that are not specified in the Annual Expenditure Budget Act, he said.

The amended law, after it wins cabinet approval, will allow the government to have a separate credit line for budget deficit purpose, Mr Theeraj said.

The amount of the cash depends on the appropriateness of the annual budget expenditure, he said.

Regarding the steep decline in treasury reserves, Mr Theeraj said treasury reserves are only the government's cash on hand, so it is unnecessary to hold excessive treasury reserves -- particularly with a budget deficit, as most treasury reserves are from borrowing.

Borrowing should done when expenditures are necessary as the government must shoulder the interest burden from such debts, he said.

The amount of treasury reserves is considered sufficient if it can cover government expenditures for two days.

Moreover, the excessive reserves will result in a financial burden on the government because it requires the government to deposit the money with the Bank of Thailand without receiving interest.

The PDMO can seek new loans to fill up the treasury reserves as needed, Mr Theeraj said.

Finance Minister Apisak Tantivorawong said earlier that the cash reserves did not reflect the government's financial status, but rather represent the money the government keeps on hand to meet short-term and emergency funding needs.

The revelation that treasury reserves sank to 74.9 billion baht at the end of last year from 386 billion at the end of 2015 fanned fears over the government's fiscal health after recent excise tax hikes on lubricant and jet fuel.

Mr Theeraj said it is unnecessary for the Finance Ministry to borrow in advance, as the local debt market is deep enough to mobilise government funds when needed.

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