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Unbelievable Forgiveness: Thailand’s Deputy Finance Minister Announces Groundbreaking Debt Moratorium for Seven Million People! What does this mean for the Future of the Economy?

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In a recent announcement, the office of Julapun Amornvivat, the Deputy Finance Minister, highlighted that an estimated seven million small-scale farmers along with small to medium-sized enterprises (SMEs) are currently deemed eligible for the debt moratorium’s introductory stage. It is projected that this total will be comprised of approximately four million farmers engaged in small-scale activities and three million established SMEs. While disclosing this information, the Deputy Finance Minister abstained from revealing detailed specifics regarding the suspension of debt, revealing that the scale and limitations of this initiative will largely be determined by the government’s fiscal responsibility towards state financial institution interest payments.

Amornvivat stated, “Debt relief will be offered to small-scale farmers and SMEs without the need for demonstrating any hardship.” More details of the scheme are anticipated in the upcoming fortnight. The plan is anticipated to be presented at a Cabinet meeting scheduled for the beginning of next month.

Subsequent to the execution of the scheme’s first phase, the government plans to scrutinize the debt issues faced by various borrowers, including individuals involved in agricultural cooperatives, police force members, teachers, and those who are subsumed in the category of informal debt borrowers. For alleviating the overall debt burden, the Prime Minister has instructed the Finance Ministry to expedite the debt suspension directed towards the first category.

Regarding the debt scheme’s potential impact on the bank’s liquidity, Chatchai Sirilai, president of the Bank for Agriculture and Agricultural Cooperatives (BAAC), assured that no such effect is likely to occur. “We have an excess liquidity of 10.6% of the total, with the Bank of Thailand minimum requirement set at 6%. In an ideal scenario, excess liquidity should not fall below 8.5 to 10% of the total,” remarked Sirilai.

The BAAC, having a total of 4.2 million customers, has been discussing various solutions for the limit on outstanding loans for the programme with the government. It has been reported by Bangkok Post that around 30% of bank customers are in debt not exceeding 100,000 baht.

Elaborating on the debt relief measures, Sirilai stressed that these measures wouldn’t lead to any moral hazards primarily because the scheme will be run simultaneously with an incentive program to educate farmers about financial management. A requirement for the farmers enrolling in the programme is to submit a statement of intent regarding their application. Options for repaying their owed amount while still enrolled in the scheme will definitely be provided. Furthermore, the program aims to provide farmers with the opportunity to secure additional loans for investment and income generation purposes, thus, discouraging them from borrowing from high-interest-charging loan sharks.

As it currently stands, the bank’s non-performing loans (NPLs) make up 8.17% of the total outstanding loan balance, with a plan in place to manage bad debts aiming to reduce NPL levels to 5.5% from the end of this financial year till March next year.

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