The Finance Ministry has raised 32.6 billion baht from selling bonds to repay rice farmers, a move that puts the caretaker government at risk of breaching election law.
The notes were issued through the existing fund-raising programme of the state-owned Bank for Agriculture and Agricultural Cooperatives (BAAC).
The book-building process for the 2.865-year bonds occurred last Thursday, an informed ministry source said, adding that the accepted coupon rate is 3.53%, the same rate as the BAAC's 37-billion-baht bonds sold earlier.
The latest batch of the bonds is part of the bank's existing 75-billion-baht bonds guaranteed by the Finance Ministry and put on sales last November, but only 37 billion baht was sold at the time.
The BAAC will receive the proceeds from the sale this Thursday to pay farmers who pledged paddy from the current main crop.
The Finance Ministry believes the sale does not violate Section 181 of the constitution, which prohibits a caretaker government from spending money on new projects or creating debt burden for the next government.
It reasons the borrowing is part of the existing bond plan, which had been approved before the government became a caretaker.
Even though the sale could pose a threat to the Pheu Thai Party, it is a do-or-die situation, as the party could lose many votes in the upcoming election if the rice farmers do not get paid.
The troubled rice-pledging scheme was initiated by the Yingluck Shinawatra government in 2011 to fulfil a campaign pledge.
It has since been criticised by academics and the opposition Democrats for corruption loopholes and hefty losses.
The programme buys paddy at 15,000 to 20,000 baht a tonne, 40-50% higher than market prices.
Besides the risk of breaching election law, the caretaker government may face more legal hurdles after the National Anti-Corruption Commission found irregularities in the scheme and brought corruption charges against former commerce minister Boonsong Teriyapirom and his deputy Poom Sarapol.
The commission has also launched a probe against caretaker Prime Minister Yingluck for negligence of duty.
For the 2013-14 main crop from Oct 1 to Feb 28, a total of 10 million tonnes of paddy worth 100 billion baht have been pledged so far, but only half the amount has been paid.
As executor of the programme, the BAAC ran out of money to pay farmers, while rice sales arranged by the Commerce Ministry has not brought in enough money to repay them.
Since the House dissolution on Dec 9, the Commerce Ministry has been reluctant to proceed with the sales for fear of breaching election law.
It has asked the Election Commission to approve some government-to-government sales but said the reply, although giving it the green light, lacks clarity about prices and delivery dates.
The ministry has so far obtained 180 billion baht from rice sales, short of the target of 10 billion baht a month.