Govt banks: Rice funding costs rise as risk rises

As govt becomes sole buyer of rice in country & govt rice stocks rise with few sales, govt bank borrowing costs grow.

Customers use services at the Government Savings Bank’s CentralWorld branch. The government may borrow money from the bank to finance its costly rice pledging scheme. (Photo: Patipat Janthong).

Click button to listen to Rice Pledging Debt Problem download

Agriculture

GSB may be called to the rescue 

BAAC facing high rates as pledging risk grows
6 Mar 2013
Wichit Chantanusornsiri & Phusadee Arunmas

The Bank for Agriculture and Agricultural Cooperatives (BAAC) may have to turn to its fellow state bank, the Government Savings Bank (GSB), to raise funds to finance the rice pledging scheme.

Finance Ministry sources said risk premiums charged in the interbank market for the BAAC have risen as a result of concerns about the stability of the rice pledging programme and worries by lenders about the liquidity status of the state bank.

"The ministry is talking with the GSB about lending to support the rice programme," said one senior official.

Funding costs for the rice pledging scheme for the 2012-13 harvest are estimated at 300 billion baht.

The scheme was launched by Prime Minister Yingluck Shinawatra in 2010, with farmers offered prices of 15,000 baht a tonne for white paddy rice and 20,000 baht for Hom Mali.

The prices, up to 40% over market prices at the time of the launch, have made the government practically the sole buyer of rice in the country and caused production to jump sharply, as farmers have rushed to take advantage of the pledging programme.

Under the scheme, the BAAC is responsible for funding the rice pledges, with repayment made by the Commerce Ministry once the rice is sold from government stocks.

But critics say the scheme has devastated the country's rice export sector due to high prices and is open to massive fraud and waste.

The UN Food and Agriculture Organization reports rice reserves in Thailand stand at a record 18.2 million tonnes, nearly double that of three years ago.

The greater pressure for the government is that global harvests this season are projected to increase by 1.2% to 472 million tonnes as the five largest shippers hoard 38 million tonnes or a year of global imports, International Grains Council data show.

Nipon Poapongsakorn, a former president of the Thailand Development Research Institute, said of the 300 billion baht estimated to be needed to cover rice pledges for the 2012-13 season, only 141 billion will be arranged by the Public Debt Management Office (PDMO).

The remaining funds are to come from remittances from the Commerce Ministry from the sale of rice pledged during the 2011-12 season, both from rice sold through government-to-government deals and grains sold to private millers and packers at auction.

"It's a big concern where the government will find the money to finance the rice pledging scheme, especially since it's clear that rice sales have fallen short of the target," Mr Nipon said.

He said having the government or PDMO directly guarantee loans for the scheme would result in other complications, as the state wants to use that borrowing space to finance its infrastructure investment programmes over the next several years

(Source: Bangkok Post, Agriculture, GSB may be called to the rescue, BAAC facing high rates as pledging risk grows, 6 Mar 2013, Wichit Chantanusornsiri & Phusadee Arunmas, link


Banking Sector Vocabulary

Bank for Agriculture and Agricultural Cooperatives (BAAC) - the Thai government bank dealing with loans to farmers and agriculture (See website)

Government Savings Bank (GSB) - one of the oldest government banks founded in 1913 (See website)

branch
- an office or shop representing a large organisation in a particular area สาขา
bank branch
GSB’s CentralWorld branch

services - บริการต่างๆ 
customers use services at a branch bank

Customers use services at the Government Savings Bank’s CentralWorld branch.

scheme - a plan that is developed by a government or large organisation in order to provide a particular service for people แผนการ โครงการ
the rice pledging scheme

finance - to provide money for something จัดหาเงินทุนให้
finance the rice pledging scheme

The government may borrow money from the bank to finance its costly rice pledging scheme

rescue - to save someone from a dangerous or unpleasant situation ช่วยชีวิต
called to the rescue
GSB may be called to the rescue

risk - danger, how likely or possible it is for a bad event that causes harm and damage ความเสี่ยง
pledging risk

the pledging risk grows
BAAC facing high rates as pledging risk grows

state - government รัฐ
state bank

fellow - used for talking about someone similar to you or in the same situation เพื่อนร่วมชะตากรรม
BAAC's fellow state bank

funds - money in bank accounts; an amount of money kept for a special purpose เงินทุน
raise funds to finance the rice pledging scheme.

The Bank for Agriculture and Agricultural Cooperatives (BAAC) may have to turn to its fellow state bank, the Government Savings Bank (GSB), to raise funds to finance the rice pledging scheme.

inter -
between
interbank -
between banks
interbank market - the interbank lending market, the market in which banks lend money (make loans) to other banks (See Wikipedia)

risk premiums - extra amounts that person must pay for a loan because loaning to them is risky
risk premiums charged in the interbank market for the BAAC

stability - when a situation does change suddenly and unexpectedly, so people can operate normally and successfully ความมีเสถียรภาพ ความมั่นคง
the stability of the rice pledging programme

concerns - worries; things that people are worried about ความกังวล
concerns about the stability of the rice pledging programme

risk premiums charged in the interbank market for the BAAC have risen as a result of concerns about the stability of the rice pledging programme

liquidity
- 1. having enough cash (or assets convertable to cash) to continue in business and continue paying off debt and liabilities; 2. the amount of cash and loans available สภาพคล่อง

status - the state or condition at a point in time สถานะ
liquidity status
the liquidity status of the state bank

Finance Ministry sources said risk premiums charged in the interbank market for the BAAC have risen as a result of concerns about the stability of the rice pledging programme and worries by lenders about the liquidity status of the state bank.

support - help, by giving money, for example สนับสนุน
support the rice programme

lending - giving money to someone who agrees to pay it back in the future การให้ยืม
GSB lending to support the rice programme

ministry - a government department dealing with an area of activity กระทรวง

The ministry is talking with the GSB about lending to support the rice programme.

funding costs - the cost of getting money to pay for some program or scheme (interest rate important if money must be borrowed)
funding costs for the rice pledging scheme

harvest - the activity of collecting a crop, in this case a rice crop การเก็บเกี่ยวผลผลิต เก็บเกี่ยว
the 2012-13 harvest

Funding costs
for the rice pledging scheme for the 2012-13 harvest are estimated at 300 billion baht.

launch - start เริ่มต้นดำเนินการ began เริ่ม
launch scheme - start a new government program

paddy rice - rice after it has been harvested from the field   ข้าวเปลือก

The scheme was launched by Prime Minister Yingluck Shinawatra in 2010, with farmers offered prices of 15,000 baht a tonne for white paddy rice and 20,000 baht for Hom Mali.

launch - an event to celebrate or introduce something new การเริ่มปฏิบัติการ, การออกตัวของสินค้า
policy launch - start a new policy
project launch

sole - only เดี่ยวๆ
the sole buyer - the only buyer
the sole buyer of rice in the country

practically ... - almost
practically the sole buyer - almost the only buyer
practically the sole buyer of rice in the country

advantage - a condition giving a greater chance of success ความได้เปรียบ
take advantage of the pledging programme

rushed - taken somewhere very quickly ด้วยความเร่งรีบ
rushed to take advantage of the pledging programme

The prices, up to 40% over market prices at the time of the launch, have made the government practically the sole buyer of rice in the country and caused production to jump sharply, as farmers have rushed to take advantage of the pledging programme.

funding - giving money to a program so it can operate การให้เงินสนับสนุน
funding the rice pledges

stocks - large amounts of something stored for future use
government rice stocks
the rice is sold from government stocks

Under the scheme, the BAAC is responsible for funding the rice pledges, with repayment made by the Commerce Ministry once the rice is sold from government stocks.

sector - a part of a country's economy or business activity ภาคเศรษฐกิจของประเทศ
the country's rice export sector

devastated - badly damaged or destroyed ถูกทำลายล้าง
the scheme has devastated the country's rice export sector

massive - very large in size, amount or numberใหญ่โต
fraud - the crime of lieing to people and cheating them for personal gain การปลอมแปลง การโกง การตุ้มตุ๋น การฉ้อโกง การหลอกลวง เล่ห์เพทุบาย (See Wikipedia)

massive fraud
is open to massive fraud and waste

critics - people who don't like something and who state their opinion about it นักวิจารณ์
But critics say the scheme has devastated the country's rice export sector due to high prices and is open to massive fraud and waste

reserves - supply for future use สงวน
record - the best or most ever achieved สถิติ
double - to become twice as big, twice as much or twice as many เพิ่มเป็นสองเท่า

The UN Food and Agriculture Organization (FAO) reports rice reserves in Thailand stand at a record 18.2 million tonnes, nearly double that of three years ago

pressure - when people are being pushed or forced to so something ความกดดัน

global - throughout the world; all over the world, including the whole world ทั่วโลก ทั้งโลก
global harvests

projected - expected, forecast; what people believe it will in the future
global harvests this season are projected to increase by 1.2%

hoard - a large amount of something that someone has saved and hidden สิ่งที่เก็บสะสม
the five largest shippers hoard 38 million tonnes or a year of global imports

data - facts or information used for making calculations or decisions ข้อมูล
the five largest shippers hoard 38 million tonnes or a year of global imports, data shows

The greater pressure for the government is that global harvests this season are projected to increase by 1.2% to 472 million tonnes as the five largest shippers hoard 38 million tonnes or a year of global imports, International Grains Council data shows.

Public Debt Management Office (PDMO).

Nipon Poapongsakorn, a former president of the Thailand Development Research Institute, said of the 300 billion baht estimated to be needed to cover rice pledges for the 2012-13 season, only 141 billion will be arranged by the Public Debt Management Office (PDMO).

remittances - money sent back to your country from a foreign country (money transfers)   (See Wikipedia)
pledged - seriously promised to do something สาบาน
auction - selling things by competitive bids, selling to the person who offers that best price (See Wikipedia) การขายโดยการประมูล, การขายทอดตลาด

The remaining funds are to come from remittances from the Commerce Ministry from the sale of rice pledged during the 2011-12 season, both from rice sold through government-to-government deals and grains sold to private millers and packers at auction

concern - a worry ความกังวล
It's a big concern ....

clear - easy to understand
it's clear that ...

target - a goal; the amount you are planning to achieve เป้าหมาย
fall short of the target - not reach you goal, not achieve your goal 

rice sales have
fallen short of the target

It's a big concern where the government will find the money to finance the rice pledging scheme, especially since it's clear that rice sales have fallen short of the target

guarantee - a promise that something will be done or will happen คำรับรอง, การประกัน
having the government or PDMO directly guarantee loans for the scheme

complications - additional problems which make a problem or disease worse อาการแทรกซ้อน โรคแทรกซ้อน
infrastructure - the high-cost facilities that everyone in the economy shares (water, roads, electricity, trains) สาธารณูปโภค

He said having the government or PDMO directly guarantee loans for the scheme would result in other complications, as the state wants to use that borrowing space to finance its infrastructure investment programmes over the next several years

About the author

columnist
Writer: Jon Fernquest
Position: Online Writer