Thread: 1997 Debt Still Outstanding

This is interesting, especially the last line which I have highlighted

The Public Debt Management Office says it remains uncertain whether lingering damage from the 1997 economic crisis should be the responsibility of the state or the Bank of Thailand.

The government is considering pushing for a legal change that would shift debt service costs for losses incurred during the crisis back to the central bank to help free up more funds from the budget for immediate stimulus and investment programmes.

The central bank's Financial Institutions Development Fund incurred liabilities of 1.4 trillion baht during the crisis for its bailout of creditors and depositors of ailing banks and finance companies.

The liabilities have been restructured over the past several years through government bond issues. While the central bank is responsible for ultimately paying down the principal debt, the Finance Ministry must carry the interest cost of the bonds.

Pongpanu Svetarundra, the director-general of the Public Debt Management Office, said liabilities incurred by the FIDF as a result of financial support given to ailing institutions prior to their closure remained the responsibility of the central bank.

Liabilities incurred after an institution was ordered closed by government order, however, were the province of the Finance Ministry, he said.

Carrying costs for the liabilities are as high as 60 to 70 billion baht per year for the government, an expense item that Finance Minister Korn Chatikavanij has stated he wants to bring down to help free up funds for other programmes.

This is not the first time that policymakers have tried to address the FIDF burden. M.R. Pridiyathorn Devakula, a former central bank governor and finance minister, in 2007 proposed amending the Currency Act to allow the central bank to shift funds more readily across its various accounts to help pay down the FIDF liabilities.

The liabilities have been split into three lots, with 500 billion baht in the first lot to be paid down from annual profits generated by the central bank. Two other lots, of 112 billion and 776 billion, would be paid through returns from the central bank's general accounts.

From 1997 to 2007, however, the central bank has paid down just 31.6 billion baht for the first lot of 500 billion baht in debt.

Bangkok Post