The Finance Ministry has set a new borrowing framework for fiscal 2013 of 480 billion baht, according to Chakkrit Parapuntakul, director-general of the Public Debt Management Office.

Of this, an estimated 150 billion baht worth of new debt guarantees is expected to be allocated to loans for the government's rice pledging scheme.

Under the law, the government may guarantee new loans taken by state agencies and state enterprises in amounts up to 20% of total budget expenditures in any given year.

For fiscal 2013 starting next month, expenditures under the budget law have been projected at 2.4 trillion baht, resulting in a guarantee limit of 480 billion baht.

Mr Chakkrit said the 150 billion baht estimate for the rice pledging scheme is only a preliminary estimate. Final funding requirements for the scheme will depend on policies and successes in selling off rice held in government warehouses.

The rice pledging programme offers farmers guaranteed prices of up to 15,000 baht per tonne for white rice paddy and up to 20,000 baht per tonne for jasmine hom mali rice. The government has committed over 270 billion baht to purchase nearly 18 million tonnes of rice since last year, and has become practically the sole buyer of rice in the country.

Arun Lertwilai, an executive vice-president of the Bank for Agriculture and Agricultural Cooperatives, said for the new rice harvest, the state bank had little excess liquidity to divert to the rice pledging programme.

The bank, which manages payments under the rice pledging scheme for the government, tapped 90 billion baht in funds for the scheme in the previous crop.

In addition to the rice programme, the BAAC also committed 50 billion baht to government-directed subsidy programmes for cassava and rubber farms over the past year.

Mr Arun said the government has already set a target of 405 billion baht for the rice pledging programme for the upcoming year.

''If the government cannot sell off some of its existing stocks, then it will have to borrow funds from the market. Namely, the BAAC will have to raise the funds with the Finance Ministry as guarantor,'' he said.

Funding costs for debt issued to finance the rice pledging scheme are equivalent to 3% a year, on par with borrowing costs for the government.

Source: Bangkok Post