http://www.bangkokpost.com/business/...y-in-fidf-debt

More urgency in FIDF debt
  • Published: 9/11/2010 at 12:00 AM
  • Newspaper section: Business

The need is becoming more urgent to refinance the 1.1 trillion baht in liabilities of the Financial Institutions Development Fund (FIDF), which cost taxpayers 65 billion baht a year in interest, says the Finance Ministry.

The huge sum spent on interest could have been used for investment instead, said Chakkrit Parapuntakul, director-general of the Public Debt Management Office (PDMO).

''That equals the cost of a railway route, 65 billion baht. Over the past decade, the burden we've shouldered has piled up to 618 billion baht. That translates into a huge loss in opportunity to develop the country,'' he said.

The FIDF liabilities, incurred from the bailout of ailing banks and finance companies during the 1997 economic crisis, account for more than one-quarter of public debt. Obligations are now 1.1 trillion baht, down from original liabilities of 1.4 trillion.

Existing interest expenses on gov ernment bonds issued to refinance the FIDF debt amount to 65 billion baht per year.

Under the law, the liabilities of the FIDF are the responsibility of the Bank of Thailand, said Mr Chakkrit.

The PDMO previously proposed refinancing existing FIDF liabilities through the issue of zero-coupon bonds. They would be issued by the Finance Ministry and placed with the central bank, allowing the government to save tens of billions of baht each year in interest expenses and increasing liquidity for public investment.

If the central bank accepts the idea, the bank itself could reduce its interest burden in the future as well, he added.

The Finance Ministry has also proposed the Bank of Thailand revise the Treasury Act to facilitate more flexible management of the country's accounts to generate more returns that could also be used for repaying FIDF liabilities.

As of August 31, the country had outstanding public debt of 4.26 trillion baht or 42.7% of GDP.