The Government Pension Fund (GPF) and the Social Security Office have not committed to a plan to buy bonds issued by the Finance Ministry aimed at raising funds to pay off rice farmers.
Rice growers from Phitsanulok province arrive at the Ministry of Commerce in Nonthaburi province on Sunday. They are joining a protest with farmers from other provinces against the government’s failure to pay for the rice they pledged months ago. (Photo by Pattarapong Chatpattarasill)
"We have yet to receive any official contact from the Finance Ministry and we intend announcing we are not involved in the issue at the moment," an informed source at the GPF said.
The legitimacy of the bond issue is a matter of concern, he said, noting it is uncertain as to whether the Finance Ministry, under the caretaker government, has the authority to offer such bonds.
Earlier, local media reported the Finance Ministry aims to sell bonds to the GPF, the Social Security Office, and the Government Lottery Office as part of its effort to seek 130 billion baht in funds to meet payments to farmers.
It has tried in vain to secure bridging loans from financial institutions as there are concerns about the legitimacy of the borrowing.
More than one million rice farmer households are angry over the payment delays as the caretaker government has run out of authority to borrow new funds.
The constitution section 181 (3) bars the caretaker government from doing anything that will create a debt burden for an incoming government.
Even though the Council of State has stated the caretaker government can proceed with the 130-billion-baht borrowing plan, financial institutions appear to be staying away from any involvement in the loan.
The rice-pledging scheme, offering a 40% higher than market price to rice growers, has been the main populist policy that helped the Pheu Thai Party win a landslide victory in the 2011 general election.
However, the scheme is tarnishing the Yingluck Shinawatra administration following the late payment debacle.
The source said available funds at the GPF for new investment are limited as almost all of its money has been ploughed into stocks, bonds and other financial instruments.
Though the GPF has invested in high liquidity financial instruments, it could take time to cash out of these assets, the source said.
In the meantime, a source at the Social Security Office said almost all of its 1.1 trillion baht worth of assets have been invested, while new funds contributed by civil servants every month must be invested as approved by the board in December.
The Social Security Office's board consists of representatives from the government, employees and employers.
Former finance minister Thirachai Phuvanatnaranubala said the government was at risk of violating Section 181 of the constitution if it goes ahead with the bond schemes.
"Not only cabinet ministers are at risk of breaching the charter, but state officials also would be at risk, which is not fair," he wrote on his Facebook page on Saturday.
He suggested the caretaker government focus on selling rice through bidding to obtain money to pay the farmers rather than issuing bonds.
''[Selling rice] is the most straightforward measure, but the government refuses to do it and resorts to risky methods," he said.