Thailand to rely more on bonds to close $ 68 billion funding gap


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(Bloomberg) – Thailand plans to dramatically increase the share of long-term sovereign bonds to meet its financing needs as Southeast Asia’s second-largest economy continues to suffer from the coronavirus pandemic.

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Bonds will account for 48% to 56% of government borrowing of 2.3 trillion baht ($ 68.4 billion) in the fiscal year that began Friday, up from 31% a year earlier, when it s ‘relied more on short-term securities such as promissory notes. and treasury bills, said Patricia Mongkhonvanit, director general of the Bureau of Public Debt Management.

“It is time for us to mitigate the risks associated with the massive issuance of short-term instruments over the past year,” Patricia said in an interview on Friday. “We plan to issue more long-term bonds to meet investor demand,” she said, adding that insurance companies and local funds prefer bonds with maturities of at least. 15 years old.

Prime Minister Prayuth Chan-Ocha’s government plans to step up economic stimulus further once the Covid-19 outbreak subsides to avoid a second consecutive year of economic contraction, which has not happened since the Asian financial crisis of 1998. The government relies on borrowing to finance the stimulus, raising the public debt ceiling last month to 70% of gross domestic product from 60% to allow more government spending in the middle of the pandemic.

The debt office plans to auction 272 billion baht of bonds in the three months to December, almost 18% more than in the previous quarter, to support the widening of stimulus measures. The increased supply will not hurt the market due to the abundance of domestic liquidity, Patricia said.

The debt office is in talks with market participants and is ready to adjust bond maturities to meet demand, Patricia said. The office sets its monthly bond auction schedule.

Under an interim borrowing plan for the current year, three- and five-year bonds will account for about half of total issuance, up from 60% last year. The supply of 10-year bonds will increase to 18% from 12% in 2020-2021, and securities with maturities ranging from 15 to 50 years will make up the remainder, Patricia said.

The finance ministry is in talks with banks for some foreign currency loans to fund some government investments, Patricia said, adding that it was still weighing on whether to tap foreign bond markets.

“We haven’t closed the door on this,” she said. “The overall costs of borrowing abroad may be higher than local rates, but it has other advantages. This helps build our credibility and also sets benchmarks for the private sector. “

Other key points of the interview:

  • Total financing requirements for the current fiscal year, including 1.1 trillion baht in new borrowing, compared with a record 2.6 trillion baht in 2020-2021

  • The higher public debt ratio is unlikely to hurt Thailand’s credit ratings, as the higher cap will give the government more flexibility to fund value-added projects and stimulate the economy

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