18-9-2023 (BANGKOK) Deputy Finance Minister Julapun Amornvivat has announced that the number of farmers and small and medium-sized enterprises (SMEs) eligible for the initial phase of the debt moratorium will not exceed 7 million. The moratorium aims to provide relief to those struggling with debt burdens during these challenging times.
During the first round of the moratorium, approximately 4 million small-scale farmers and 3 million SMEs will be eligible for the suspension of both principal and interest payments. While specific details regarding the extent and limit of the debt suspension are yet to be disclosed, they will be determined, in part, by the fiscal burden borne by the government in terms of interest payments to state financial institutions.
Mr. Julapun emphasized that the debt relief would be offered to small-scale farmers and SMEs without requiring them to prove hardship. Further information about the scheme is expected to be unveiled over the next two weeks and will be presented to a cabinet meeting in early October.
Once the initial phase is implemented, the government plans to address the debt issues faced by other borrower categories, such as agricultural cooperatives, teachers, police officers, and informal debt borrowers. This comprehensive approach aims to alleviate the debt burdens of a wider population.
Chatchai Sirilai, president of the Bank for Agriculture and Agricultural Cooperatives (BAAC), assured that the debt moratorium scheme for farmers would not impact the bank’s liquidity. The BAAC currently maintains excess liquidity of 10.6% of the total liquidity, surpassing the Bank of Thailand’s minimum requirement of 6%.
To ensure sufficient liquidity, the bank proposed various options for the outstanding loan limit within the program. The BAAC serves 4.2 million customers, with around 30% of them having debts of less than 100,000 baht.
Mr. Chatchai emphasized that the debt relief measures would not create moral hazard as the scheme would be accompanied by an incentive program aimed at educating farmers. Farmers participating in the program must submit a statement of intent with their application, and those who prefer to continue repaying their debts while in the program are allowed to do so.
Furthermore, the government provides opportunities for participating farmers to obtain additional loans from the BAAC for investment and income generation, aiming to discourage borrowing from loan sharks charging exorbitant interest rates.
Currently, the BAAC’s non-performing loans (NPLs) stand at 8.17% of the outstanding loan balance. The bank has set a target to reduce NPL levels to 5.5% by the end of the current accounting year, which extends until March of next year.
