Higher-Than-Expected Losses Negative For Thailand's Rating: Moody's

[webfact]

RICE-PLEDGING
Higher-than-expected losses negative for Thailand's rating: Moody's
The Nation

BANGKOK: -- Recent losses and any future losses from the unmodified rice buying scheme will increase the difficulty of the Thai government's task of reaching its goal of a balanced budget by 2017, and are credit negative for the Thai sovereign, warned Moody's Investors Service.

The rating company based its comment on the reports that losses from Thailand's rice buying scheme in the harvest season 2011-12 are bigger than the Ministry of Finance originally forecast.

Thailand, rated "Baa1" with stable outlook, is hopeful to win a credit upgrade, to resume the"A" rating once assigned before the financial crisis in 1997.

In a statement, Moody’s said that on the implied losses of Bt200 billion in the harvest year, it is much higher than World Bank’s estimate of Bt115 billion and the Finance Ministry’s forecast loss of Bt70-Bt100 billion.

The major sovereign credit implications of the continuation of the program and its associated costs lie in the government's fiscal accounts. Previous estimates of losses for the 2011-12 harvest year were equal to 1.0 per cent of gross domestic product, but the current estimate brings the cost up to 1.7 per cent of GDP or 7.8 per cent of total expenditures in 2012.

The overall budget deficit for the fiscal year ended September 2012 reached 4.1 per cent of GDP, revised slightly downward from 3.9 per cent because of a larger-than-expected non-budgetary cash deficit.

"While financing of Thailand's budget deficits is supported by the country's deep onshore capital markets, the growing losses from the rice buying scheme and the potential need for additional government funding resulting from the continuation of the scheme increasingly jeopardise a reduced deficit, which we previously forecast will be 3.1 per cent of GDP in fiscal 2013. In addition, this makes achieving a balanced budget by 2017 more challenging."

-- The Nation 2013-06-03

[Thait Spot]

^{I think Kittirat has a rating of Baa Baa with an outlook of Bo Bo}

[55Jay]

....... and there goes the Dollar above 30 now.

[Thai at Heart]

ooooooops

[Moruya]

I'm sure it hasn't escaped Moody's attention that a number of key financial figures have been incorrect and that they have all been overcooking the PTP government policies

Sent from my Nexus 4 using Thaivisa Connect Thailand mobile app

[rubl]

But there is no loss as we still have all rice. What do Bloomberg and the Worldbank say?

[GentlemanJim]

There will be a statement from Chalerm tomorrow saying Thailand doesn't give a damn about Moody's as Moody's doesn't understand Thailand, and the Government will carry on as normal. If anything needs fixing, he can do it in 3 months.

[waza]

Not a good report card for the PTP's fiscal management, lets see how the spin this.

[GentlemanJim]

That won't increase the interest on 2.2 Trillion then will it !

[Bellweather]

Time is right for TAT to weigh in with one of its tourism on the rise statements.

[robblok]

No problems, they wanted a lower currency this will help. Only problem is that it might rise the cost of the loans. Besides the warning given is not of their concern as it falls way out of their term. This is a problem for later they live now to rob the country blind.

[Thai at Heart]

Time is right for TAT to weigh in with one of its tourism on the rise statements.

They need plodprasop to take a nationwide tour, right now.

[bigbamboo]

Time is right for TAT to weigh in with one of its tourism on the rise statements.

They need plodprasop to take a nationwide tour, right now.

Sod Plodrasop., this is desperation stakes. The ratings agencies are sharpening their knives in readiness for a cut.

This needs Khun Kittikat to get cracking on a Good News Week statement.

[hellodolly]

That won't increase the interest on 2.2 Trillion then will it !

For sure I am not a whiz at economics but if I remember correctly the lower Moody's rate you the higher interest you must pay on loans. As I understood it they were the ones that all the lending institutions would look to for a rating on the financial situation in a country.

Like I say I don't understand economics so I could be wrong. If I am please show me the way they do it.

edit

spelling before the spelling police get me.

Edited June 3, 2013 by hellodolly

[ratcatcher]

BECAUSE...

[kevinsan]

The Revolving Rice Bond that never revolves. Thailand is on the cusp of rice preservation technology. A NIDA grant to study the issue is urgently needed. Just keep it under 2m. Or just name June Thai Rice Preservation and Restoration Month. This usually resolves most issues.

Well boys, at least the bars will benefit when the scheme explodes. Ka-boom boom!

[GentlemanJim]

hellodolly, on 03 Jun 2013 - 20:41, said:

GentlemanJim, on 03 Jun 2013 - 16:40, said:

That won't increase the interest on 2.2 Trillion then will it !

For sure I am not a whiz at economics but if I remember correctly the lower Moody's rate you the higher interest you must pay on loans. As I understood it they were the ones that all the lending institutions would look to for a rating on the financial situation in a country.

Like I say I don't understand economics so I could be wrong. If I am please show me the way they do it.

edit

spelling before the spelling police get me.

In a nutshell that is basically it hellodolly. Interest may go up 1/2 a percent or 1% on loans. Not much if it hit you or I, but a shed load on 2.2 Trillion Governments also have to pay back a higher interest on any bonds they have sold.

Edited June 3, 2013 by GentlemanJim

[Baerboxer]

I'm sure the usual TV pundits who are government supporters will be quick to respond and point out for us why Moody's have got it wrong.

[rubl]

Higher Mathematical Economics is not always easy, even when we have Moody's, Worldbank, Bloomberg and CMK to help us understand. It would seem that the current government is (almost) able to balance the 2013/1024 National Budget of 2.52 trillion Baht by allowing a mere gap of less than 10% (the odd sum of 250 billion only). Of course moving of some public debt to less visible places, like the 1.14 trillion Baht under the BoT's carpet and a separate budget of 2.2 trillion (or is it 2.4 trillion?) also helps.

It just shows a government must be imaginative in calculating and planning the expenditure of taxpayer's money.

BTW I didn't forget about it but I'm simply not sure yet how to position the 500 billion non-revolving fund the government borrowed from their state bank BAAC, or the 120 billion the state banks KTB and GSB pledged to support the 350 billion 'water management' plan. Puzzling issue.

Edited June 3, 2013 by rubl

[moe666]

I'm sure the usual TV pundits who are government supporters will be quick to respond and point out for us why Moody's have got it wrong.

I have noticed that the usual suspects no longer show up in support of the rice scam I mean scheme. I would love for GK to come and explain it all away about a year ago he wrote a long opinion on why the rice scam would be successful.

[Skywalker69]

BIGGEST surprise,ever.

[Utley]

And so it begins - just as Thailand is about to enter the bond market to finance their new flood water management program and to finance the construction of high speed rail links; oh and not to forget new ports so Thailand can become an international shipping hub.

Over the next couple of years, people who purchased autos under the government rebate program will begin defaulting on their loans - won't even be able to make the 4 years of payments necessary to apply for the government rebate money (if there is any left). I hope the banks are well capitalized as they are the ones who will take the hit.

The U.S. had a sub-prime home mortgage fiasco lending to people who didn't have the where-with-all to repay. Thailand is doing the exact same thing but on a smaller scale with autos.

The baht isn't done falling boys; hang on and enjoy the ride!

[webfact]

UPDATE:
Ratings giant warns rice scheme puts goals at risk
The Nation

BANGKOK: Moody's Investors Service has warned that bigger than expected losses from the government's rice buying scheme put the country's economic goals at risk.

Recent losses and any future losses from the unmodified scheme would increase the difficulty of the government achieving a balanced budget by 2017, and were "credit negative" for the Thai sovereign, Moody's said yesterday.

The rating company based its comment on reports that losses from the controversial rice scheme in the 2011-12 harvest season were bigger than the Ministry of Finance originally forecast.

Thailand - rated "Baa1" with stable outlook - had hoped to win a credit upgrade, to an "A" rating once assigned before the financial crisis in 1997.

But in a statement, Moody's said implied losses of Bt200 billion in the harvest year were much higher than the World Bank's estimate of Bt115 billion and the Finance Ministry's forecast loss of Bt70-Bt100 billion.

Continuing the program and bearing further costs would have major credit implications, it said. Previous estimates of losses for the 2011-12 harvest year were equal to 1.0 per cent of gross domestic product, but the current estimate puts the cost at 1.7 per cent of GDP or 7.8 per cent of total expenditure in 2012.

The overall budget deficit for the fiscal year that ended in September 2012 reached 4.1 per cent of GDP, but was revised slightly downward from 3.9 per cent because of a larger-than-expected non-budgetary cash deficit.

"While financing of Thailand's budget deficits is supported by the country's deep onshore capital markets, the growing losses from the rice buying scheme and the potential need for additional government funding resulting from the continuation of the scheme increasingly jeopardise a reduced deficit, which we previously forecast will be 3.1 per cent of GDP in fiscal 2013," the statement said.

"In addition, this makes achieving a balanced budget by 2017 more challenging."

The current rice subsidy scheme was established in October 2011 in order to boost farmers' incomes. "However, the government's purchase of rice at around 50 per cent above market prices carries a fiscal cost when the rice has to be resold at a loss," it noted.

"In the past five harvest seasons, rice farmer support programs required much smaller government outlays that averaged less than a third of the estimated cost of the 2011-12 program.

"In addition, the government's rice buying scheme is largely responsible for a decline in rice exports. Total earnings from rice exports fell in 2012 to $4.6 billion from $6.4 billion in the previous year, owing to the government withholding rice stocks for sale.

"In volume terms, Thailand's rice exports fell to 6.7 million tonnes in 2012 from 10.7 million tonnes in 2011, the lowest level since 2000. However, given that rice exports make up a relatively small proportion of Thailand's total exports (averaging 2.6 per cent over the past 10 years), the direct and immediate effect on Thailand's balance of payments is not material."

Meanwhile, Democrat MP Warong Dechgitvigrom vowed to file a petition with the National Anti-Corruption Commission tomorrow, asking it to check irregularities in the rice pledging scheme.

Warong said he wanted all relevant officials, a ten-member committee working under Commerce Minister Boonsong Teriyapirom inspected.

"I will also seek an investigation into the business sector,'' he said.

The MP said he would make a two-minute video clip on the rice pledging scheme to be shown via social media networks, plus details of the scheme would be made into pocket books.

Warong, who grilled the government about the scheme in Parliament, said either the rice-pledging scheme would die, or it would bring down the Yingluck Shinawatra administration.


-- The Nation 2013-06-04

[Tatsujin]

I believe Moody's rather than the bullxxxx figures the Govt puts out every day. For those supporters of this scheme (and others) and this Government, open your eyes and see how far down the road to ruin they are taking this country. It won't be long before there is no coming back from it.

Edited June 4, 2013 by metisdead
3) Not to post in a manner that is vulgar, obscene or profane.

[Thai at Heart]

I would really love to have seen if there was any structured idea ever put together about how the government intended to hold the global buyers to ransom and get them to buy this overpriced product?

[Utley]

I would really love to have seen if there was any structured idea ever put together about how the government intended to hold the global buyers to ransom and get them to buy this overpriced product?

Of course the government has a plan; it is entitled "wishful thinking".

[watcharacters]

I'm sure the usual TV pundits who are government supporters will be quick to respond and point out for us why Moody's have got it wrong.

I have noticed that the usual suspects no longer show up in support of the rice scam I mean scheme. I would love for GK to come and explain it all away about a year ago he wrote a long opinion on why the rice scam would be successful.

.

Who is GK?

[harryfrompattaya]

....... and there goes the Dollar above 30 now.

One has to known that Moody's is control by Soros remember him ( the little old man with a very young GF) who is raiding the baht as before He is betting it will go to 60

Edited June 4, 2013 by harryfrompattaya

[harryfrompattaya]

I believe Moody's rather than the bullxxxx figures the Govt puts out every day. For those supporters of this scheme (and others) and this Government, open your eyes and see how far down the road to ruin they are taking this country. It won't be long before there is no coming back from it.

Moodys is control by Soros I believe the Government not a month piece for Soros

[Ricardo]

I would really love to have seen if there was any structured idea ever put together about how the government intended to hold the global buyers to ransom and get them to buy this overpriced product?

Of course the government has a plan; it is entitled "wishful thinking".

Although the Big Boss prefers to call it 'manipulating world prices for two or three years', and seems to regard it as eminently feasible and acceptable, so what do any of us plebs know ?