Govt debt to disappear

1.14 trillion baht in govt debt from 1997 crisis to be erased immediately by shifting off balance sheet to Bank of Thailand.

Read the first response of the Bank of Thailand to this move here.

Click button to listen to FIDF Debt Shift to download

Cabinet passes the buck, B1.14 trillion in FIDF debt goes to BoT by Chatrudee Theparat, Parista Yuthamanop & Wichit Chantanusornsiri 

Cabinet ministers agreed to transfer responsibility to the Bank of Thailand yesterday for 1.14 trillion baht in debt stemming from the 1997 economic crisis. 

The move will reduce debt expenses for the government by up to 70 billion baht per year and give the Finance Ministry greater leeway to undertake new borrowing to finance future investment programmes. 

Kittiratt Na-Ranong, a deputy prime minister overseeing economic policy, said once the transfer is complete, public debt under the government would drop by 10 percentage points to 30% of gross domestic product.

This would enable new government loans for water management infrastructure programmes while still maintaining financial and monetary discipline, he said.

On Monday, the ministers agreed to issue 350 billion baht in new government bonds to help finance floodways and water management systems to help prevent a repeat of this year's disastrous floods.

Public debt as of September totalled 4.448 trillion baht, or 41.66% of GDP.

The debt stemmed from obligations carried by the Financial Institutions Development Fund, a unit of the central bank, as a result of bailouts given to depositors and creditors of failed banks and finance companies during the 1997 economic crisis.

Later, the central bank and Finance Ministry agreed to shift the FIDF obligations to the government, with the condition that profits generated from the management of the country's foreign reserves be also transferred annually to help offset the debt.  

But the steady appreciation of the baht over the past decade has resulted in the overall FIDF debt declining only by a negligible amount. 

Finance Minister Thirachai Phuvanatnaranubala said the ministry, the Bank of Thailand and the National Economic and Social Development Board would meet with Mr Kittiratt to consider the implications on the capital market, fiscal discipline and investor confidence if the transfer is made.

The Finance Ministry noted over the past 10 years, interest expenses on the debt have amounted to 618 billion baht, or over 60 billion per year directly charged to the government budget. 

Mr Kittiratt said the central bank, with foreign reserves of $175 billion, had more than adequate resources to absorb the obligations. 

"I understand the central bank doesn't want to take responsibility for the debt, but we are seeking solutions in the future for this country," he said.

The FIDF liabilities were made the responsibility of the government under two emergency decrees issued in 1998, under the Chuan Leekpai government, and in 2002, under the Thaksin Shinawatra government. The 1998 law stipulated that annual profits generated from reserves held with the central bank's Banking Department would be set aside to pay for government bonds issued to cover the FIDF liabilities. The 2002 law called for the central bank to transfer profits from asset revaluations in reserves held in the Note Issue Department to offset costs for FIDF bonds issued that year. 

Chanchai Boonritchaisri, a central bank assistant governor, said the government is expected to seek a consensus with the bank before moving forward with legal changes to transfer the liabilities back to the Bank of Thailand.

Central bank governor Prasarn Trairatvorakul has been firmly opposed to calls for the FIDF liabilities to be transferred from the public debt. He said earlier this year the central bank could incur a loss of up to 1.5 trillion baht over the next five years if the FIDF liabilities were transferred, undermining its ability to conduct monetary policy. 

(Source: Bangkok Post, Cabinet passes the buck, B1.14 trillion in FIDF debt goes to BoT, 28/12/2011, Chatrudee Theparat, Parista Yuthamanop & Wichit Chantanusornsiri, link) 

 Economics and Banking Vocabulary

pass the buck - give your problem to another person to deal with 

debt - an amount of money that you owe หนี้
FIDF debt

transfer - 1. shift or give something to another person or organization to do; 2. change ownership to another person; to officially arrange for someone else to be the owner of something โอน

transfer responsibility to the Bank of Thailand

stem from - come, caused by
crisis - an urgent, difficult or dangerous situation วิกฤตการณ์  วิกฤต

1.14 trillion baht in debt stemming from the 1997 economic crisis

leeway - flexibility
undertake - to do รับภาระ
finance - to provide money for something such as money to expand a business, project funding จัดหาเงินทุนให้
investment - taking your money and putting it into projects to make a profit or earn interest (buying stock shares, bonds, real estate)

give greater leeway to undertake new borrowing to finance future investment programmes. 

overseeing - managing, checking to see that it operates properly and nothing goes wrong
policy - a set of plans or action agreed on by a government, political party, business, or other group, a plan of action to guide decisions and achieve outcomes (See Wikipedia) นโยบาย

overseeing economic policy

public debt - government debt
gross domestic product (GDP) - the total value of all the goods and services produced by a country in one year

once the transfer is complete, public debt under the government would drop by 10 percentage points to 30% of gross domestic product

discipline - following rules and standards of behaviour, forcing others to follow these rules ปฏิบัติตามระเบียบข้อบังคับ (See glossary)

maintaining financial and monetary discipline

enable - to make someone able to do something, or to make something possible ทำให้เป็นไปได้
infrastructure - the high-cost facilities that everyone in the economy shares (water, roads, electricity, trains) สาธารณูปโภค

this would enable new government loans for water management infrastructure programmes while still maintaining financial and monetary discipline

issue - offering securities (stock shares, bonds) for sale
disastrous - extremely bad or unsuccessful ซึ่งทำให้เกิด (ภัยพิบัติ, ความหายนะ, ความโชคร้าย)

the ministers agreed to issue 350 billion baht in new government bonds to help finance floodways and water management systems to help prevent a repeat of this year's disastrous floods

obligations - 1. debt, liabilities, money that must be paid in the future to another person; 2. duties, responsibilities, things you must do หน้าที่ที่พึงกระทำ ข้อบังคับ
depositors - people who keep their money at a bank in exchange for interest payments
creditors - people who are owed money (waiting to be paid back the money), people who have provided loans but have not been paid back yet

the debt stemmed from obligations carried by the Financial Institutions Development Fund, a unit of the central bank, as a result of bailouts given to depositors and creditors of failed banks and finance companies during the 1997 economic crisis.

shift - to transfer; to move from one place to another เคลื่อนย้าย
condition - something that must be done before another thing can happen เงื่อนไข
generated - created
reserves - the amount of foreign currency or gold held by a national bank, which is used for dealing with the national banks of other countries เงินสำรอง
transferred - moved
annually - happening every year ทุกๆปีด
offset - reduce by moving in the opposite direction (See glossary)

agreed to shift the FIDF obligations to the government, with the condition that profits generated from the management of the country's foreign reserves be also transferred annually to help offset the debt.  

steady - continuous without stopping
appreciation - when a country's currency becomes more valuable compared to the currencies of other countries (which makes goods exported from the country more expensive)
decade - a period of ten years ทศวรรษ, ระยะเวลา 10 ปี
negligible - very small or unimportant ซึ่งไม่สลักสำคัญ

the steady appreciation of the baht over the past decade has resulted in the overall FIDF debt declining only by a negligible amount. 

ministry - a government department dealing with an area of activity กระทรวง
capital - money invested in a business (See glossary)
fiscal - connected with the government spending and budget, i.e., public money เกี่ยวกับงบประมาณ
investor - a person or organisation that puts money into a company in exchange for a future profit นักลงทุน
confidence - feel sure about something; trusting and believing in something ความมั่นใจ  ความเชื่อมั่น

Finance Minister Thirachai Phuvanatnaranubala said the ministry, the Bank of Thailand and the National Economic and Social Development Board would meet with Mr Kittiratt to consider the implications on the capital market, fiscal discipline and investor confidence if the transfer is made.

interest - payments made for the use of another's money for a period of time
budget - the amounts of money that an organisation has available to spend on different things during a period งบประมาณ (See Wikipedia)
adequate - good enough or large enough for a particular purpose พอเพียง

The Finance Ministry noted over the past 10 years, interest expenses on the debt have amounted to 618 billion baht, or over 60 billion per year directly charged to the government budget. 

resources - the materials, money, and other things needed for a person or organisation to function properly; things such as money, workers and equipment that can be used to help achieve something ทรัพยากร
absorb - 1. to accept something or take something without being affected by it (example: absorb losses without the business failing) to take in a liquid, gas or other substance form the surface or space around ซึมซับ ดูดกลืน

Mr Kittiratt said the central bank, with foreign reserves of $175 billion, had more than adequate resources to absorb the obligations

take responsibility for - agree to do something (that someone must do, that must be done)
I understand the central bank doesn't want to take responsibility for the debt, but we are seeking solutions in the future for this country

liabilities - 1. the amount of money that a company owes; debts หนี้สิน หนี้ขององค์กร 2. money borrowed by a company (liabilities + owners' equity = assets)
emergency - an unexpected situation involving danger in which immediate action is necessary เหตุฉุกเฉิน
issued - made available ออกใหม่
the FIDF liabilities were made the responsibility of the government under two emergency decrees issued in 1998, under the Chuan Leekpai government, and in 2002, under the Thaksin Shinawatra government.

stipulated - say clearly that something must be done (in a contract) The pig farmer said he spoke for many who
annual - happening once a year ประจำปี
asset - something owned by a person, company etc., particularly money and property ทรัพย์สิน
the 1998 law stipulated that annual profits generated from reserves held with the central bank's Banking Department would be set aside to pay for government bonds issued to cover the FIDF liabilities

the 2002 law called for the central bank to transfer profits from asset revaluations in reserves held in the Note Issue Department to offset costs for FIDF bonds issued that year. 

expected - believe will happen คาดว่า (จะเกิดขึ้น)
consensus - a generally accepted opinion or decision among a group of people ความคิดเห็นของคนส่วนใหญ่
seek a consensus - try to get everyone to agree about an action or policy before doing it
 
the government is expected to seek a consensus with the bank before moving forward with legal changes to transfer the liabilities back to the Bank of Thailand

public debt - government debt
incur - do something so that you owe money to another person, or do something to lose money (examples: incur charges, incur costs, incur a debt, incur an expense, incur a loss)

monetary policy - the way in which a government or central bank controls the supply of money and credit in an economy (See Wikipedia)

undermine - make weak
conduct - to do something in an organised way; to carry out
conduct monetary policy - do monetary policy
undermining its ability to conduct monetary policy - make them unable to do a good job at monetary policy 

Central bank governor Prasarn Trairatvorakul has been firmly opposed to calls for the FIDF liabilities to be transferred from the public debt. He said earlier this year the central bank could incur a loss of up to 1.5 trillion baht over the next five years if the FIDF liabilities were transferred, undermining its ability to conduct monetary policy.