Thai state bank again seeks funds for troubled rice scheme

by Reuters
Monday, 6 January 2014 09:29 GMT

(Adds detail, political background, comment)

By Apornrath Phoonphongphiphat

BANGKOK, Jan 6 (Reuters) - A Thai state-backed farm bank will issue a 20 billion baht ($606 million) bond next week in another attempt to raise funds for the government's rice-buying scheme, which has run out of money because of a failure to find buyers for the grain.

The generous intervention scheme helped Prime Minister Yingluck Shinawatra win power in a 2011 election but hundreds of farmers, some unpaid since October, have joined demonstrations which began in November. More are considering joining protests next week aimed at ousting her.

"The 20 billion baht is not enough to pay the thousands of farmers who are still waiting for their money and they are getting angry and thinking about protesting," said Prasit Boonchoey, head of the Thai Farmers Association. He told Reuters he attended anti-government rallies in November.

The bond issue could face a tough reception next week given the political uncertainty, with protesters planning to shut down Bangkok to sabotage the upcoming election.

Millions of farmers in the northeast remain loyal to Yingluck and her brother, Thaksin Shinawatra, who brought in cheap healthcare and other measures to help them when he was in power until 2006, but farmers elsewhere may not be so solid.

Thaksin was ousted by the military and now lives in exile but he is widely seen as the power behind his sister's government. She has called an election for Feb. 2 but that has failed to defuse the protests.

The Bank of Agriculture and Agricultural Cooperatives (BAAC) only managed to raise 37 billion baht when it auctioned an initial 75 billion baht bond in November.

Churarat Sutheethorn, head of the Public Debt Management Office (PDMO), told Reuters a new three-year bond would be auctioned on Jan. 16.

"It is part of the total 75 billion baht in bonds we aimed to issue to fund the 2013/14 rice scheme," she said, adding the bank could return to the debt market again in March to try to raise the remaining 18 billion baht.

The Yingluck government won a landslide election in July 2011 helped by its promise to pay farmers 15,000 baht per tonne of paddy, way above the market price.

The scheme made Thai rice uncompetitive in the export market and in 2012 Thailand lost its crown as the world's top exporter to India. The state amassed huge stockpiles which it is still struggling to sell.

Anti-Thaksin protesters say the scheme is corrupt and has helped wealthy farmers and regional politicians more than the poor. It helped fuel opposition to Yingluck before the outbreak of street protests in November.

The BAAC, acting for the state, has spent up to 680 billion baht buying rice and the scheme is expected to run up huge losses if grain is eventually offloaded at market prices.

The government has not put an official estimate on the losses but industry insiders and some academics say they could be as high as 425 billion baht.

As a comparison, the projected government budget deficit for fiscal 2013/14 is 250 billion baht for 2013/14, about 1.9 percent of gross domestic product (GDP). ($1 = 33.0150 Thai baht) (Editing by Alan Raybould and Amran Abocar)

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