March 31, 2010

The government is introducing a debt moratorium scheme for farmers worth 80 billion baht which is seen as a strategy to appease grass roots people as political divisions continue to widen.

The plan was released as tension mounted after a second round of negotiations between red shirt demonstrators, most of them farmers in northern and northeastern provinces, and the government failed on Monday.

A government committee on easing farmers' debts is planning to submit the scheme to cabinet next month.

The ad hoc committee met on Monday to discuss a debt moratorium scheme for about 80,000 farmers who are members of the Farmers' Reconstruction and Development Fund (FRDF) and 430,000 farmers who are not FRDF members.

The committee is chaired by Deputy Prime Minister Sanan Kachornprasart.

The 510,000 debtors in the farm sector have a total principal debt of more than 80 billion baht.

The debt moratorium will be limited to 2.5 million baht each, said Khunying Supatra Masdit, an adviser to the prime minister, who sits on the committee.

She said the new debt restructuring scheme will help clear farmers' debts owed to financial institutions within 15 years.

Under the proposed scheme, the FRDF will act as a go-between for the creditors and the debtors, who will reach agreements to repay debts.

Farmers will be offered a debt reduction of 50% on their principal and all interest on their loans will be exempted.

Under the debt restructuring procedures, financial institutions must sign an agreement to assure that they will not seize land plots placed as collateral by farmers and that farmers will be allowed to make use of the plots to make a living.

However, Khunying Supatra said if farmers failed to repay the other half of their debts within an agreed timeline without a good reason, the agreement would be cancelled.

She said farmers eligible to take part in the proposed debt restructuring programme must have debt of no more than 2.5 million baht.

Prapat Panyachartrak, adviser to Agriculture Minister Theera Wongsamut, said the panel had told the fund to find out the exact figures of the debtors and the amount of debt they owed and submit them to the panel for consideration before forwarding the details to the cabinet.

He said the FRDF will discuss the details for debt repayment with the Finance Ministry and the Bank of Thailand.

The final details will be submitted to the cabinet in the middle of next month, Mr Prapat said.

"The farm debt moratorium is a subtle issue and requires more than 90 billion baht. Details of the matter are still sketchy," Mr Prapat said.

Mr Prapat has been assigned by the agriculture minister to sit on the committee to find ways to ease farmer's debts.

He said the committee has worked together with the FRDF to restructure farm debts for a long time and that there was no intention to exploit the debt moratorium scheme to build popular support for the government or to convince the red shirts to end their anti-government demonstration.

Source: Bangkok Post