Thailand adamant on rail loan cap
The Public Debt Management Office (PDMO) has capped the interest rate of a planned 170-billion-baht loan from China to finance the Bangkok-Nakhon Ratchasima highspeed train project at 2%, and has threatened to seek domestic funding if China charges a higher rate.
The Chinese government must not charge over a 2% interest rate, regardless of whether the loan is in yuan or US dollar, PDMO director-general Suwit Rojanavanich said. The government will switch to domestic funding sources if China does not agree to the request.
If the government must secure domestic loans, it will not dry up the country’s financial liquidity, as borrowing for the railway project can be done in phases, he said.
Disagreement over the 252.5-kilometre railway section’s loan rate is another issue that is slowing the project’s progress.
Thirteen bilateral talks between the Thai and Chinese authorities over the Sino-Thai railway have been held, but they have so far failed to agree over the interest rate. The Chinese government is offering a 3% interest rate, citing it as the market rate, while the Thai government expects a cheaper rate for government-to-government borrowing.
Transport Minister Arkhom Termpittayapaisith recently said the draft contract for the Sino-Thai high-speed railway should be finalised in October, and the first phase of construction is expected to start in December. Thailand will be fully responsible for the first phase, 3.5 km of railway construction.
The Sino-Thai railway project also includes a 355-km section from Nakhon Ratchasima to Nong Khai province, bordering Laos, and a 246.5-km section from Saraburi to Rayong province — the latter of which is set to be built at later dates.
Meanwhile, Finance Minister Apisak Tantivorawong yesterday signed a loan agreement with Japan for the final installment for the Dark Red Bang Sue-Rangsit suburban railway line, worth 53.4 billion baht. The loan has a 15-year maturity with a five-year grace period at a mere 0.3%.
The Red Line Mass Transit System project uses foreign loans, mainly from the Japan International Cooperation Agency (Jica), as well as domestic borrowing. The suburban train’s service is expected to begin by 2020.
Mr Suwit said the borrowing cost for the project stands at 2% after accounting for the costs of exchanging currency into baht.
PDMO could have raised domestic funds at a similar rate, but decided to borrow from the Jica as it did not want to compete with domestic operators to secure financing.