Rice Subsidy

[nifty11]

Could someone explain to me and any other late comers about the Rice Subsidy and the problems surrounding it.

Will it have any effect on the Baht if the farmers don't get their money with foreign investment losing (more) confidence with the Thai Government?

Don't have a degree in Economics so Laymen's terms will do.

[oogster8]

eat mo rice...and everything will be ok.

[NBD]

Basically the government guaranteed the price of rice way above market value by promising to buy it all and ended up stuck with millions of tons of rice, but didn't have the money to pay for it.

Not likely to have a massive impact on investor confidence if you're planning to build a factory or something here, but it definitely does have an impact on the Baht if the Thai government is unable to fulfill it's obligations.

This will make it much more difficult (i.e. expensive) for the government to borrow money and more likely they will default on debt. Probably not very likely in the immediate future, but a possibility in the medium term.

It's pretty much what most western governments have been doing for the last 10 years as well, the difference is that western countries have a much larger tax base, making a debt default is much less likely.

(Studied Economics at university and vaguely followed the current situation)