Thailand seals the deal for emergency support loan from Japan

The Thailand deal for a long-term multi-billion baht loan with Japan was formally announced today. Last month the government made the announcement to approach Japan for the loan. On May 3, the Thai Finance Minister, Akom Termpittayapaisit, explained to Thai media that he signed the agreement on Covid-19 Crisis Response Emergency Support Loan with a representative from JICA Morota Takahiro.

The Royal Gazette today announced Thailand will borrow an “emergency support loan” of 13 billion baht from Japan.

The loan, approved by the Cabinet on April 26, is needed to help ease the country back on its feet after the economic downturn caused by the Covid-19 pandemic.

The government and Japan International Cooperation Agency negotiated the 15 year loan at an interest rate of 0.01% per year. The loan repayments, scheduled for May 20 and November 20 of every year, will be exempted for the first 4 years.

The Front-End-Fee was 0.2% and this payment has to be made within 60 days after the contract was activated.

This isn’t the first time a loan has been conducted between the two Asian nations. PM Prayut Chan-o-cha’s administration took out emergency loans worth 1.5 trillion baht between 2020 and 2021. Commenting about the online response to the announcement of the loan last month, the PM said he was aware that Thai people would focus on the loan. He said the amount was included in a long-standing plan to be able to borrow money to solve social and economic problems in the wake of the Covid pandemic.

The public debt ceiling was increased from 60% to 70% of GDP in 2021 and the outstanding was at 60.81% of the GDP as of the end of April.

The Bank of Thailand’s Monetary Policy Committee says the Thai economy is recovering thanks to the recent resurgence of tourism, although still a long way behind pre-2020 levels, but inflation is high leading to higher living costs.

But it’s not all bad news as the BOT expect the economy to expand by 3.3% this year and by 4.2% in 2023. Headline inflation is projected to be at 6.2% in 2022 and 2.5% in 2023. The Thai PM noted that the loan reflects the country’s ability to service the repayments and the resilience of the local economy.

“Thailand has a strong financial status. If not, no one would let Thailand borrow money.”

Thailand is unlikely to be heading into recession this year, unlike a lot of more developed economies.

SOURCE: Thai Enquirer