TDRI says losses from rice-pledging scheme may exceed estimates
A warning by credit-rating agency Moody’s about the government’s controversial rice-pledging scheme is “worth listening to”, and the loss from the scheme this year is expected to exceed estimates, a senior Thailand Development Research Institute (TDRI) official said yesterday.
An earlier forecast of the scheme estimated an accumulated loss of about Bt150 billion to Bt170 billion in the first year, said Somchai Jitsuchon, the TDRI’s research director. “The scheme may see another Bt200 billion lost this year, which is quite a huge amount, as it is equivalent to nearly 10 per cent of the annual budget,” he added.
He said the TDRI estimate of the scheme’s loss last year was close to the amount cited in a report by a Finance Ministry committee tasked with handling the scheme, at Bt210 billion to Bt260 billion. Many government figures said this estimate was possibly used by Moody’s, unfairly against the government, in its criteria, threatening a possible downgrade of Thailand’s credit ratings.
The government yesterday challenged the Bt260-billion loss estimate by Moody’s, which referred to the Finance Ministry panel report on the rice-pledging scheme. PM’s Office Minister Nivatthamrong Boonsongpaisal, freshly assigned to lead a fact-finding team and verify the viability of the scheme, said the loss could be a bit higher than Bt100 billion.
The Bt260-billion figure may have been based on the entire quantity of rice bought or pledged through the scheme, not on the actual loss, he said.
“The official figures will be revealed by Commerce Minister Boonsong Teriyapirom, on Friday [tomorrow],” he said, after a Cabinet meeting on economic issues yesterday. Later, he said the scheme was not only about pledging rice, but also other farm products. He did not elaborate.
Boonsong said later that a per-corp loss to the scheme should not exceed Bt60 billion to Bt80 billion.
The government made concerted efforts to counter Moody’s warning yesterday. Nivatthamrong said later there would be no budget increase for the scheme until the year-end. It would rely on a total of Bt500 billion – Bt410 billion from a government subsidy and another Bt90 billion from a subsidy by the Bank for Agriculture and Agricultural Cooperatives (BAAC).
Government Spokesman Wim Rungwattanajinda said the government and Yingluck had not been informed properly and sufficiently about the scheme’s operation by the Commerce Ministry with regards to three key areas – the quantity of rice in government custody, the stock in custody resold to buyers, and the amount of money spent under the scheme.
The Commerce Ministry is required to submit initial figures to Yingluck by today, and the figures would be revised and finalised before being made public tomorrow, and later communicated to Moody’s, Wim said.
The ministers attending the meeting left Government House without making comments after yesterday’s session. Only Nivatthamrong spoke to reporters later at his office. He said the losses could have been even in the region of “tens of billions of baht”, but he did not have any official information available to support his claim until the Finance and Commerce ministries made the figures public tomorrow.
Apart from assigning Nivatthamrong to jointly take charge of the verification of Moody’s figures, the Cabinet economic meeting, which was attended by key government figures on economic affairs and central bank executives, also discussed the baht situation following a recent decision by the Bank of Thailand’s Monetary Policy Committee to cut the interest rate by 0.25 percentage point.
Vasin Vanichvoranun, an executive vice president at Kasikornbank, said the Moody’s downgrade of Thailand’s credit rating may go to the Baa1 level after it decided to issue the warning. He said the warning, coupled with the US deactivation of quantitative easing, would likely influence Thai commercial banks to consider further cutting interest rates, in addition to the recent 25 basis points.
The price of Thai rice is being hit by negative factors like the Moody’s warning and the decision of Vietnam – the world’s second-largest rice exporter after India – to lower export prices of the grain to boost demand as fresh supplies begin to roll in, news agencies quoted traders as saying yesterday.
The Vietnam Food Association has set a floor price for 25 per cent broken grain at US$365 (Bt11,1100) a tonne and cut the floor for 35 per cent broken rice by 1.4 per cent to $360 a tonne, Vietnamese traders said. The new floor prices are on a free-on-board basis. The Yingluck government buys from farmers at a minimum price of $500 per tonne, making sales to foreign buyers even more difficult.
First published in The Nation, 6th June 2013