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| July 21, 2000 | atimes.com | ||
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Southeast Asia
Thailand opts for bonds, not increased taxes BANGKOK - The Thai government will continue to raise money through bond sales to support the weak economy rather than raise taxes, a senior official says. Sommai Pasri, a deputy undersecretary at the Ministry of Finance, was commenting following the government's sale this week of five billion baht (US$125 million) to the public. "Money raised from the bond sales will be used to subsidize the budget deficit since the government chooses not to hurt people by raising taxes," the official said. Over the past two years the government has raised about 90 billion baht through bond sales. In the most recent issue, the minimum investment was 10,000 baht, with the bonds reserved for individuals, charity organizations or cooperatives. The bonds carried a term of five years, with interest of 6.4 percent paid every six months. After taxes, the returns are expected to be about 5.4 percent, still favorable given that bank deposit rates are now between 2.75 percent and 3.5 percent. Investors will be able to sell the bonds to local financial institutions after six months. Once the bonds are fully sold, the Finance Ministry is expected to approve a second five-billion-baht issue for individuals. The second bond issue will carry a term of seven years and pay interest of 7.2 percent. Commenting on the government debt - 2.613 trillion baht, or 52 percent of gross domestic product - Sommai said he was not particularly concerned. "A debt burden of almost 60 percent of GDP is not too high when you consider developed countries, whose debt amounts are higher than 80 percent of GDP. However, an informed source from a private commercial bank said that the high level of government debt might affect its ability to attract investment and to stimulate the economy. He warned the government to be careful about raising money during the election period (scheduled for the third quarter of the year) as it was a sensitive topic and people might misinterpret why the government needs more funds. People might suspect that the government was simply raising money for more projects in order to make itself popular with electors to win more votes. (From Manager Daily) |
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