Only 1.3% of PSA loans turned sour

Of the 789 billion baht in loans in the public service account (PSA), more than 500 billion was extended by the state-backed farm bank to finance the Yingluck Shinawatra administration’s rice pledging scheme, says a senior Finance Ministry official.

Of the total, only a meagre 1.3%, or 10.4 billion baht, have turned sour, said Krisada Chinavicharana, director-general of the Fiscal Policy Office. The PSA loans, extended by state-controlled banks, have funded government policies since 2009 and are guaranteed by the state.

Despite the scheme’s setback, the Bank for Agriculture and Agricultural Cooperatives (BAAC) bonds funding it have been guaranteed and paid by the Finance Ministry. A breakdown by lenders to the PSA shows BAAC’s lending amounts to 706 billion baht or 89%.

“Some 620 billion baht was lent before the National Council for Peace and Order took control,” he said.

The 150 billion baht in soft loans sponsored by the Government Savings Bank under the current government’s stimulus package to help small and medium-sized enterprises gain better access to borrowing was not included in the PSA accounting.

Mr Krisada said this was the first time the loan amount under the PSA has been revealed, helping to increase transparency.

The government sets a budget of 60-80 billion baht each fiscal year to pay the interest rate and principal from PSA borrowing. Off-budget spending through state-run banks was frequently used by ousted prime minister Thaksin Shinawatra, but this amount was never disclosed to the public.

Mr Krisada said the cabinet on Tuesday gave the green light to raising the state borrowing plan for fiscal year 2016 to 1.74 trillion baht from 1.32 trillion. Under the new borrowing plan, new borrowing will be cut by 25.7 billion baht, while the amount for debt management — comprising debt for risk management and debt restructuring — will be raised by 39 billion.

The higher amount is for increased debt restructuring of the BAAC, the National Housing Authority and Bangkok Mass Transit Authority, as well as risk management for Thai Airways International (THAI).

Separately, the cabinet approved a draft bill on practices in information exchange to enable tax collection under the Foreign Account Tax Compliance Act. Fatca is a US law obliging institutions worldwide to report information to the Internal Revenue Service about accounts and investments held by any US citizen or green card holder to prevent tax avoidance in offshore markets. Foreign banks that do not share information are subject to a 30% withholding tax for every transaction with the US. He said Thailand will gain financial information about Thais in other countries, helping tax collection efficiency.