Moratorium On Debts OK: Thai Govt Stimulus Measures

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STIMULUS MEASURES

Moratorium on debts OK

The Nation

A picture taken recently shows cassava growers in many districts in Buriram has called the government for debt moratorium scheme to help ease their burden after facing with lowering cassava prices.

SMEs, diesel users get tax breaks too

BANGKOK: -- The government is pressing ahead with its populist policies, in particular a debt-moratorium package that was approved by the Cabinet yesterday.

Other schemes approved include a continuation of diesel excise exemption, plus soft loans and tax breaks for small and medium-sized enterprises.

The various measures require a budget of Bt45 billion to subsidise.

Ministers approved a moratorium for people in debt to the tune of no more than Bt500,000 each to state-run banks.

To benefit from the measure, they must have a good record of debt repayment.

Beneficiaries will get suspension of principal repayment for three years, as well as being eligible for an interest-rate reduction of 3 percentage points on their loans.

The three-year debt moratorium will run from September this year until August 2015.

However, the Bank for Agriculture and Agricultural Cooperatives (BAAC) will be hit the most during the moratorium, losing Bt6 billion in income as it has 2.9 million debtors falling under the new measure, accounting for 80 per cent of its customer base.

Some 3.8 million people with a combined debt of Bt460 billion are potentially eligible under the scheme.

Of the total, the BAAC has 2.9 million accounts worth Bt390 billion, while the remainder are shared by the Government Saving Bank and the Small and Medium Enterprise Development Bank of Thailand (SME Bank).

Finance Minister Kittiratt Na-Ranong said yesterday that the policy would boost the economy significantly. He said the burden from interest-rate deduction would be borne by both the government and the state-owned banks at the rate of 1.5 percentage points each.

While the state-run banks will have to reduce their profits to support the project, he said the policy should not affect them greatly as they had overwhelming excess liquidity.

"In particular, if clients don't focus on principal debt moratorium, it will not hit the banks' liquidity," he said, adding that the government stood ready to seek funding sources to support the banks involved.

Luck Wajananawatch, president of the BAAC, said that if the bank's eligible customers all joined the programme, it would affect operating results by Bt6 billion.

However, the government has promised to raise capital in the bank to maintain its funds level.

Government Savings Bank president and chief executive Lersuk Chuladesa said that if all 840,000 targeted clients joined the programme, it would take Bt700 million off the bank's profit in each of the three years.

Meanwhile, the Cabinet has extended the excise waiver on diesel for another month until May 31 to ease the rising cost of living, said Kittiratt, who is also deputy prime minister .

While the tax exemption costs about Bt9 billion to Bt10 billion per month, the government can collect other taxes to offset the cost as its stimulus package boosts economic growth, he said.

The Cabinet also approved soft loans and tax breaks for SMEs adversely affected by the rise in minimum wages to Bt300 per day.

Among the measures are productivity improvement loans, which will be provided by the SME Bank. The loans, worth Bt20 billion in total, will be divided into two types, for the development of machinery and working processes, and the scheme will have a support budget of Bt1.8 billion.

The measures are expected to lead to Bt86 billion of additional lending to SMEs.

Under the new tax breaks for SMEs, those selling old machines to buy new ones will be exempted from corporate income tax on income from the sale of the old machinery.

SMEs will get a depreciation tax allowance up to 100 per cent in the first year, and can benefit from a tax deduction up to 1.5 times for extra wages paid to labourers.

The Finance Ministry says 200,000 SMEs and 500,000 individuals are expected to benefit from the package.

-- The Nation 2012-04-25

[Pib]

Seems so many products and/or groups of people get subsidies in Thailand; buy hey, it happens in western countries also but they are usually call tax breaks/credits.

[waza]

Seem the PT party is learning from its mistakes and throwing a few bones to the electrate

[jonclark]

Interesting to see the criteria used to decide whether the applicant has "a good record of debt repayment" Those in greatest debt are usually those with the worst debt repayment records, which makes me think those in greatest debt will be least affected by this policy. Hopefully I;m wrong.

I also think that as a condition to being eligible, applicants should be provided with some rudimentary business skills (2 day course) to help them avoid or minimize future debts and better manage their businesses.

[moe666]

PTP should change there name to the everything is free party=EFP

[whybother]

Is there a need for government stimulus at the moment?

[billd766]

As far as I understand it the borrowers will only defer the payments for up to 3 years when they will be liable for the full amount.

Of course it could be extended at that point and surprise surprise in 3 years time if the government runs the full course it will be time for another election.

If they use the next deferment as an election promise and they win the taxpayer pays anyway, and if they lose it won't be their problem anyway.

[mommysboy]

Default. There seems to be a different way of dealing with debt out here, in the West this would be counted as default, over here it just gets rolled over. Makes you wonder just how much useless credit there is out here, and whether the Thai fiscal position would look quite so rosy if debts like these were seen for what they are- default.

[cloudhopper]

"Finance Minister Kittiratt Na-Ranong said yesterday that the policy would boost the economy significantly"

Sure it will Mr. Minister. Do even more then.

[Skywalker69]

Is there a need for government stimulus at the moment?

Yes, the all seems to sleep in Parlament.

[maidu]

Will cost Bt.22.85 billion. "Both Tanusak and Finance Minister Kittiratt Na-Ranong have defended the scheme on the grounds that it will not use much taxpayer money." Bt.22.85 billion is "not much taxpayer money" !?!?!?! Message from PT party: borrow as much as possible, but don't worry about paying it back. We want your votes, so you get your loans forgiven, especially if they're BIG LOANS. The plan has Thaksin's smell all over it. Using gov't tax money to buy votes.