Low rates to beef up farmers' fund

Local administrations and some government agencies are keen to park their cash at the fund set up to help farmers in the wake of low interest rates, according to the state farm bank.

The Bank for Agriculture and Agricultural Cooperatives (BAAC) expects 10 billion baht to be deposited by local governments in one of the fund's three accounts.

Since late last year, almost one million farmers who sold their rice to the rice-pledging scheme have yet to be paid for the grain because the caretaker government lacks the mandate to borrow or shift funds.

Meanwhile, a new government cannot be formed because the Feb 2 election was nullified and a new one has yet to be scheduled due to political conflicts.  

To help the farmers, the BAAC set up the farmers' fund in February. It consists of three bank accounts to accept deposits from people wishing to help the farmers during the government transition period. 

The first account is for direct donations. The second account gives no interest and the principal can be withdrawn on Dec 31, 2014, when the project ends. The third account gives a 0.63% interest rate and the principal can be withdrawn on the same date.

All of the money in these accounts, except for the donations account, will be returned to the fund and its depositors once the new government with a full mandate to borrow is in place. 

The three funds raised 1.18 billion baht as of March 25, according to the BAAC's website. Of the total, 55% was in the zero-interest account, 43% in the 0.63%-interest account and the rest the donation account. 

The central bank cut its policy rate to 2% from 2.25% on March 12 to stimulate the economy, triggering interest reductions by commercial banks.

"Savings interest rates have been cut to 0.50% a year but we still give 0.63% for the third account. This will attract more funds from local governments," said BAAC president Luck Wajananawat.

Some 850,000 farmers have yet to be paid 100 billion baht for the rice they sold to the pledging scheme. The fund has mobilised 1.5 billion, 1 billion of which has been paid to farmers, Mr Luck said.

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