Finance Ministry starts loan auctions

The Public Debt Management Office (PDMO) will kick-start the bridging-loan auction today in hopes of mobilising funds to repay rice farmers by the end of this month.

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The Finance Ministry has already submitted a letter to 32 financial institutions, inviting them to participate in the bidding.

It aims to raise 20-40 billion baht worth of loans from each auction, said a source at the ministry who commented on anonymity.

The ministry hopes to draw down the bridging loan to pay farmers on Jan 31.

Since the 2013/14 main crop began in October, the state-owned Bank for Agriculture and Agricultural Cooperatives (BAAC), which handles payments to farmers, has paid 50 billion baht to around 400,000 farmers.

However, one million more who pledged 100 billion baht worth of paddy have yet to be paid as the money allocated for the payments dried up. The BAAC earlier estimated the pledging value could reach 190 billion baht for the current main crop running through the end of February.

The caretaker government plans to secure bridge financing from local banks to pay the angry farmers who are also the Pheu Thai Party's main voters. The BAAC will later issue bonds to be guaranteed by the Finance Ministry to pay the short-term loans.

The source, however, questioned the legitimacy of the Council of State's opinion on the borrowing. The state legal adviser told the government it could proceed with the 130-billion-baht borrowing plan.

But the source said the letter sent to the ministry was signed by the council's secretary-general, instead of its committee as required by the cabinet's 1949 resolution.

The source also pointed out that it is the Constitutional Court, not the Election Commission, which can decide whether the borrowing is legitimate, the source said.

The Finance Ministry decided to go ahead with the borrowing plan after the Council of State had given it a green light, saying the move will not add new debt burden. The ministry plans to transfer the budget set for infrastructure investment to pay the farmers.

In the meantime, the BAAC insists it will not extend loans to the government under the bridge-loan plan.

"We will only use source of funding to be arranged by the government for payments. Absolutely, we won't use our liquidity to fund the scheme. So, the BAAC will stop paying if the government can't seek enough funds for us,'' said executive vice-president Somsak Kangteerawat.

He said that the bank has already resumed paying farmers after it received money from the Commerce Ministry's rice sales and from the budget recently approved for financing the rice-pledging scheme.

Mr Somsak also said the BAAC no longer needs to offer relief measures to farmers following the government's clear-cut plan on the 130-billion-baht borrowing.

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