Failure To Target the Borrowing Stimulus as Spending Drops

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Thailand is expected to sell less bonds this fiscal year than previously planned, as government spending is hindered by delays in selecting the right projects to mitigate the blow from coronavirus outbreak.

The government will borrow just 450 billion baht through bond sales and through term loans in the year ending Sept. 30, less than the 600 billion baht previously expected to finance the Covid-19 stimulus programme, said Patricia Mongkhonvanit, managing director of the Public Debt Management Bureau. The remaining 550 billion, part of the 1 trillion baht borrowing for stimulus, will be completed in the 2020-21 fiscal year, she said.

They have no problem with borrowing, but they have to wait until projects are ready first, Ms Patricia said in an interview, adding the less-than-expected mobilization of funds is also because some of the projects were funded from the central budget balance. They will ensure our borrowing does not conflict with the bond market.

Lower supply of bonds will help to offset the recent increase in benchmark Thai bond yields and ease funding costs for the record 1.9 trillion baht stimulus programme. The second largest economy in Southeast Asia is on track for its deepest ever annual contraction of 8.5 per cent this year after the virus outbreak sent tourism and trade into a slump.

Next year’s overall sales of sovereign bonds will range from 700 billion to 800 billion baht as the government’s funding need is projected at around 2 trillion baht, both of which have changed little from this fiscal year, Patricia said. The debt management office is in close contact with Bank of Thailand on the timing of bond offers and aims to sell further treasury bills to meet short-term demand.

The Bank of Thailand cut the main interest rate of the nation three times this year to a record low of 0.5 per cent and said it would retain the limited policy room to move at the necessary and most efficient timing. The central bank has considered other unorthodox policy instruments and urged the government to take the lead in spurring development with fiscal policies.

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