Thai government defaults on paying off rice farmers

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Thailand lost its three-decades-old title as the world's top rice exporterThe caretaker government in Thailand is unable to pay off rice farmers as promised by the end of January because it was unable to raise enough funds in a loan auction on January 30, where only a few local banks participated.

Under the rice pledging scheme, the government owes 130 billion baht ($4 billion) to 100,000s of farmers who haven’t been paid since October 2013. To make ends meet, many of the farmers were forced to sell tractors and other agricultural equipment or rely on loan sharks or went bankrupt. At least three farmers under the scheme have committed suicide.

The farmers have also threatened to travel to Bangkok to join the mass rallies led by anti-government protest leader Suthep Thaugsuban. However, they were reportedly intimidated by pro-government Red Shirts to end their protests and return home.

The reason for the disaster is extremely embarrassing for the Thai government. When Premier Yingluck Shinawatra dissolved parliament on December 9, 2013, she and her cabinet forgot to approve a fresh budget for the rice scheme, which had been expanded due to failure of the commerce ministry to recycle the money back from rice sales.

Thus, there is now no money to pay to the farmers. In its reduced caretaker capacity, the Thai finance ministry is constitutionally barred from borrowing money that would create obligations for the next government.

The attempt to raise funds through a loan auction also failed miserably. The ministry had to call off a 20-billion-baht bridging loan auction on January 30 aimed at borrowing to repay unpaid rice farmers as only a few banks participated in the bidding. Even state-owned banks such as the Government Savings Bank and the Bank for Agriculture and Agricultural Cooperatives did not appear at the auction.

The banks voiced concerns as to whether the borrowing is constitutional and cited the unclear political situation and several legal issues, though the finance ministry insisted the banks will be repaid even if the borrowing is voided later on.

Since the 2013-14 main rice crop season began in October 2013, 10 million tonnes of paddy worth 150 billion baht have been pledged under the rice subsidy scheme, but the government has only paid around 50 billion baht to the now indebted farmers.

Thailand’s National Anti-Corruption Commission has said it will conduct impeachment and criminal investigations against Yingluck Shinawatra for her involvement in the rice subsidy scheme.

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Reading Time: 2 minutes

The caretaker government in Thailand is unable to pay off rice farmers as promised by the end of January because it was unable to raise enough funds in a loan auction on January 30, where only a few local banks participated.

Reading Time: 2 minutes

Thailand lost its three-decades-old title as the world's top rice exporterThe caretaker government in Thailand is unable to pay off rice farmers as promised by the end of January because it was unable to raise enough funds in a loan auction on January 30, where only a few local banks participated.

Under the rice pledging scheme, the government owes 130 billion baht ($4 billion) to 100,000s of farmers who haven’t been paid since October 2013. To make ends meet, many of the farmers were forced to sell tractors and other agricultural equipment or rely on loan sharks or went bankrupt. At least three farmers under the scheme have committed suicide.

The farmers have also threatened to travel to Bangkok to join the mass rallies led by anti-government protest leader Suthep Thaugsuban. However, they were reportedly intimidated by pro-government Red Shirts to end their protests and return home.

The reason for the disaster is extremely embarrassing for the Thai government. When Premier Yingluck Shinawatra dissolved parliament on December 9, 2013, she and her cabinet forgot to approve a fresh budget for the rice scheme, which had been expanded due to failure of the commerce ministry to recycle the money back from rice sales.

Thus, there is now no money to pay to the farmers. In its reduced caretaker capacity, the Thai finance ministry is constitutionally barred from borrowing money that would create obligations for the next government.

The attempt to raise funds through a loan auction also failed miserably. The ministry had to call off a 20-billion-baht bridging loan auction on January 30 aimed at borrowing to repay unpaid rice farmers as only a few banks participated in the bidding. Even state-owned banks such as the Government Savings Bank and the Bank for Agriculture and Agricultural Cooperatives did not appear at the auction.

The banks voiced concerns as to whether the borrowing is constitutional and cited the unclear political situation and several legal issues, though the finance ministry insisted the banks will be repaid even if the borrowing is voided later on.

Since the 2013-14 main rice crop season began in October 2013, 10 million tonnes of paddy worth 150 billion baht have been pledged under the rice subsidy scheme, but the government has only paid around 50 billion baht to the now indebted farmers.

Thailand’s National Anti-Corruption Commission has said it will conduct impeachment and criminal investigations against Yingluck Shinawatra for her involvement in the rice subsidy scheme.

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