Thai farmers offered debt suspension to regain good debtor status

Farmers with outstanding debts at the Bank for Agriculture and Agricultural Cooperatives (BAAC) in Thailand can now enter a debt suspension scheme without the need for prior debt restructuring, according to Paopoom Rojanasakul, the secretary to the finance minister. The move aims to help these farmers regain their good debtor status and is applicable to all BAAC debtors whose total outstanding debt does not exceed 300,000 baht.

Previously, there was a misconception that debtors with non-performing loans (NPLs) had to undergo debt restructuring before they could be eligible for this programme. To encourage these debtors to regain their regular debtor status, the government will cover their interest payments for a period of three months. This strategy is expected to significantly reduce the number of NPLs at the BAAC.

Paopoom went on to explain that the monthly instalments from these debtors will be used exclusively to lower the debt principal, speeding up the process of debt reduction.

The Finance Ministry is also considering a one-year debt suspension for small and medium-sized enterprises (SMEs) adversely affected by the Covid-19 pandemic, identified under the Bank of Thailand account status code 21. This group, numbering around three million, collectively holds a debt of about 300 billion baht as of the second quarter of this year.

The ministry has yet to decide whether the debt suspension would apply solely to the principal or include the interest as well. The debt moratorium for SMEs will primarily apply to those borrowing from state-owned financial institutions. For SME borrowers from commercial banks, the ministry and the Bank of Thailand aim to seek further cooperation from these banks.

On September 26, the Thai Cabinet approved a three-year debt moratorium for farmers, estimated to cost the government around 30 billion baht. The first phase of this programme kicks off on October 1 and will run until September 30 of the following year.

Farmers eligible for the moratorium must not have a total debt from BAAC accounts exceeding 300,000 baht as of September 30 this year. According to Paopoom, approximately 2.69 million farmers with a combined debt of around 300 billion baht are eligible to join the scheme, accounting for 64% of the BAAC’s debtors, reports Bangkok Post.

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