BANGKOK (Reuters) - Thailand’s prime minister has told her commerce minister to clarify the cost of the government’s rice intervention scheme, after a warning this week that mounting losses could affect the country’s credit rating.
The government buys from farmers at prices that have made Thai rice uncompetitive on world markets, leading to growing stockpiles funded from the state budget and costing Thailand its spot as the world’s number one exporter. It said last week it would extend the politically popular intervention for a third year.
A newspaper report last week put losses from the scheme in the 2011/12 harvest year at 200 billion baht (4.2 billion pounds), prompting the warning from rating agency Moody‘s, and a finance ministry official said the losses continue to rise.
“Those losses are as of January 31. The real figure must be higher than that now,” Supa Piyajitti, a deputy permanent secretary at the ministry, told Reuters.
Supa said the overall losses took into account the price paid, storage costs and value lost through rice going rotten after being kept in warehouses since the scheme started in October 2011.
Supa looked after the accounts for the scheme, but said she was transferred to another job in the ministry this week.
At 200 billion baht, the losses would be equivalent to around 8 percent of the total government budget for the year to end-September. The Nation newspaper on Wednesday put the loss at 260 bln baht, citing a finance ministry report.
“The prime minister has given the Commerce Ministry the job of making all the figures clear and the commerce minister is expected to hold a press briefing over the next few days,” Niwatthamrong Bunsongphaisan, a minister without portfolio, told reporters.
Yingluck came to power in 2011 helped by an election promise to pay farmers 15,000 baht a tonne for rice, way above the market price at the time.
The intervention scheme has forced up the prices offered by private exporters, with 5 percent broken rice quoted at $540 (351.5 pounds) a tonne on Wednesday, around $150-$170 a tonne higher than the same grade from India, Pakistan and Vietnam.
In April, Moody’s said the outlook for Thailand’s credit rating of Baa1 was stable, based on a “high degree of government financial strength” among other factors, although it noted that “populist measures” were a risk to financial discipline.
On Monday, reacting to the reported 200 billion baht in losses, it said: “These recent losses, and any further losses from the unmodified rice-buying scheme, increase the difficulty of the government’s task of reaching its goal of a balanced budget by 2017, and are credit negative for the Thai sovereign.”
Somchai Sajjapong, chief of the Finance Ministry’s fiscal policy office (FPO), told reporters that Moody’s had used “incorrect” information. The FPO was collecting the proper data and would explain that to the agency, he said.
In 2011, the government said it had allocated 410 billion baht to buy rice, making that amount available in tranches to the state-owned Bank of Agriculture and Agricultural Cooperatives (BAAC), which runs the scheme.
It aimed to get its money back by selling the rice on the market, but its plans were dashed when India re-entered the export market in September 2011 with its cheaper grain, and the funds have now run out.
Thai exports tumbled to 6.9 million tonnes in 2012, down from a record high of 10.6 million tonnes in 2011, and exporters forecast shipments of just 6 million tonnes this year.
“The government has to figure out where it will get money from as we have used up all of the 410 billion baht loan set for the scheme,” Supat Eauchai, a BAAC vice-president, told Reuters.
Additional reporting by Kittiphong Thaichareon; Editing by Alan Raybould and Michael Urquhart