The US$1.5 billion borrowed from the Asian Development Bank (ADB) comes with favourable conditions for Thailand, says the Public Debt Management Office (PDMO).
On Aug 4, the cabinet approved the Finance Ministry's proposal to borrow $1.5 billion from the ADB to stimulate and rehabilitate the economy.
The borrowing scheme is part of the government's plan to issue a royal decree to borrow 1 trillion baht to revive the virus-hit economy.
The interest rate, instalment period and grace period for principal payment represent a good deal for Thailand, said PDMO director Patricia Mongkhonvanit.
The conditions help to diversify the risk of borrowing, while the ADB is also offering technical assistance to borrowers, Mrs Patricia said.
Repayment reportedly will be divided into two tranches, with the first worth $500 million and carrying a term of 10 years, with a three-year grace period. The second tranche worth $1 billion carries a term of five years, with a three-year grace period.
The Finance Ministry is required to disburse the borrowing by June 30, 2021.
The ADB loan will be taken out on a gradual basis depending on the Covid-19 remediation programme and in accordance with the 1-trillion-baht loan decree, which prohibits financing of infrastructure projects, Mrs Patricia said.
The public debt level will rise to 57% of GDP from June's 44.8% upon borrowing the full amount under the loan decree.
Public debt is capped at 60% under the fiscal sustainability framework. A 50% cap applies to the medium-term fiscal plan.
Separately, Japan Credit Rating Agency Ltd (JCR) affirmed the credit ratings of Thailand's long-term government bonds at A- and the baht at A, with a stable outlook.
Though the state will incur a greater fiscal deficit and public debt from fiscal and monetary policies this year, JCR believes that the government will continue to maintain fiscal discipline and keep public debt at a manageable level.