June 13--Financial institutions' appetite remained strong at yesterday's second-round auction worth 40 billion baht held by the Bank for Agriculture and Agricultural Cooperatives (BAAC), given that rates were lower than for comparable government bonds.
The Government Savings Bank (GSB) won a bid to extend 20 billion baht in loans to the state-backed farm bank at a rate of 10 basis points below the six-month Bangkok Interbank Offered Rate (Bibor).
Bank of Ayudhya and Bank of Tokyo-Mitsubishi UFJ won bids to lend 10 billion baht each at rates equal to the six-month Bibor and five basis points above the six-month Bibor, respectively.
The six-month Bibor averaged 2.283% yesterday.
The 40 billion baht in term loans carried an average rate of 2.2705%, well below the three-year government bond rate of 2.46%, said Chularat Suteethorn, director-general of the Public Debt Management Office.
Total demand at yesterday's term-loan auction hit 114 billion baht, oversubscribed by 2.85 times. Eleven financial institutions took part in the bidding.
The GSB last week won the 50-billion-baht term-loan auction to advance payments to farmers who pledged paddy under the previous government's rice scheme.
That bid produced a record low rate of 2.1792%.
The Yingluck Shinawatra government had fallen months behind on 92 billion baht in late payments to some 850,000 rice farmers due mainly to its limited borrowing ability under caretaker status. Sales of stockpiled rice failed to generate enough income to pay farmers all at once.
Moreover, the Commerce Ministry's hasty rice release in the first five months of the year, the absence of the pledging scheme for the 2014 second crop and speculation in the massive stockpiles at government warehouses have pressured market prices.
Paddy with a moisture content of 25% is selling for 5,400 to 6,000 baht a tonne, well below farmers' costs of 7,000 baht a tonne and about half the 11,000 to 12,000 baht paid under the pledging scheme.
Payments proceeded quickly after the army staged its coup on May 22 and granted approval for the BAAC to use its own liquidity for advance payments to rice farmers.
The Fiscal Policy Office earlier estimated the 92-billion-baht payout to farmers would add 0.2 percentage points to the country's economic growth this year as it created a multiplier effect in the economy.
The rice-pledging scheme was the flagship populist policy that helped Ms Yingluck's Pheu Thai Party sweep to power in the 2011 general election, but the programme has been sharply criticised for its mounting losses and potential corruption.
A Finance Ministry source earlier estimated losses from the scheme would reach 500 billion baht for the past five crops.
Ms Chularat said the BAAC would draw down the 40 billion baht in loans next Thursday.
The state-owned bank has already paid 713,000 farmers a combined 72.3 billion baht.
The remaining unpaid farmers are expected to receive their money in the coming weeks.
(c)2014 the Bangkok Post (Bangkok, Thailand)
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