The government borrows 170 billion from BAAC to distribute digital wallets. Is there a risk?

Announcement of details of criteria for 10,000 baht top-up scheme through digital wallet One of the sources of money used from the Bank of Agriculture and Agricultural Cooperatives (BAAC) borrowing more than 170 billion, confirmed that BAAC has the authority and responsibility to take action. And there is sufficient cash flow but the chairman of the Economic Committee of the Progressive Party (BAAC) pointed out that this was “walking a fine line” that could go against BAAC's operational objectives.

On April 10, Mr. Setha Tavisin, Prime Minister and Minister of Finance lead the panel to open the report of the results of the policy committee meeting on the 10,000 baht top-up scheme through digital wallet. The source of money to execute the project with a budget of 500,000 million baht comes from 3 areas:

Mr. Lawan Saengsanit, Permanent Secretary of the Ministry of Finance said and confirmed that the limit of 172,300 million baht is from the 2025 fiscal year, referring to the source of digital wallet money from BAAC for more than 17 million farmers, according to the State Financial Regulation Act 2018. The Ministry of Finance has confirmed that BAAC is able to discharge its mandate and duties and that liquidity is adequate. But first we have to wait for the 2025 budget to pass.

The Permanent Secretary, Ministry of Finance said that repayment of funds to BAAC is a budgetary process in which the government sets a budget for periodic repayments to state banks, which will be in line with the correctness of the budget every year.

What can be interpreted as borrowing from BAAC prior to processing by government agencies and what will be the effect?

The BBC compiles commentary from the Thai government, opinions and views from opposition parties and experts. In this article

List of MPs Mrs. Sirikanya Dhansakul, Chairman of the Economic Committee of the Progressive Party (ACC), said that BAAC will distribute digital money using channels as per Section 28 of the Financial Regulation Act. To distribute BAAC digital money, “you have to do something to interpret” or “rely on the line of interpretation”.

She said this since the beginning of the public debate to ask questions about the facts or refer issues to the Cabinet on April 3, 2017 according to Article 152 of the Constitution, there is no resolution that using this method may not comply with the objectives of the BAAC due to the operational objectives of the BAAC Act. Section 9 (3) clearly states that to be a financial institution for rural development and transactions, it should be productive. Reduce costs for farmers

Later, details about the source of funding for the digital wallet project were revealed. Miss Sirikanya expressed her opinion on the YouTube program “Worker's News Talk Off Screen”. BAAC can take action. This will open a new door for BAAC's activities, which need not be farmer-related business.

“As soon as the recipient is a farmer, it is considered a given. This will become the new norm. The government will be able to use the money from BAAC as ATMs,” said the Economic Committee Chairman of BAAC Party.

Dr. Nonarit Phisaleputr, senior academician at the Thailand Development Research Institute (DTRI) told BBC Thai that given the company's vision of being a sustainable rural development bank, and the organization's shared values ​​of “lifting the economy in the community and being strong at the rural level,” it has the ability to compete and be confident. “He will find that giving money is unlikely to be consistent with the company's vision and values.

“Giving people money cannot achieve sustainable development. Like giving fish. But they don't teach fishing, although they claim that the economy has slowed to the point where money has to be distributed. But this kind of payment was done throughout the previous governments. But it never leads to true self-confidence.

Announcing the details of the digital wallet top-up scheme, the Permanent Secretary in the Ministry of Finance confirmed that BAAC has sufficient liquidity to implement the policy at some point.

The issue of BAAC's liquidity is another concern of the Chairman of the Advanced Economies Group.

Ms. Sirikanya pointed out that currently, BAAC's financial statement reports indicate that there is more than 300 billion baht in circulation, perhaps BAAC is not cash flow ready? Govt continues with distribution of BAAC digital wallets. This may affect other programs or loans. No BAAC? Additionally, it is known that PAAC has problems with cash management. This is because we don't know how much money the government will use to repay BAAC every year.

In addition, BAAC's plan already has various programs, such as suspending agricultural loans for 3 years or giving farmers 1,000 baht per rai, a total of 60,000 million baht, if necessary, will the entire budget of this area be enough? Budget structure? Because the ceiling is still 32% as per the framework of fiscal discipline in the case of borrowing from public institutions and is constantly being “pressed” by the government for utilization.

Paupam Rojanasakul, Secretary to the Finance Minister Mr. Digital Wallet as a member of the policy committee of the 10,000 baht top-up project explained in the News Worker Talk Off Screen program at the start of the digital wallet project which is in 2025 financial year. It is ensured that the loan ceiling will not exceed 30% when adding the financial limit of the digital wallet scheme used by BAAC.

As far as BAAC's liquidity is concerned, it is ensured that there is excess liquidity that can be used to do anything without affecting anything. and is sufficient to implement the digital wallet scheme used by section 28 of the Financial and Financial Conduct Act. BAAC is already taking action including schemes.

“The bank's liquidity system cannot disclose figures as it is a matter of stability, but it has been confirmed that currently BAAC has more liquidity than the digital wallet scheme. This scheme is in BAAC's pipeline,” said Mr. Baffum said.

The government's repayment to BAAC has exceeded 900,000 million baht due to BAAC's operation of a digital wallet top-up program worth 172,300 million baht.

The plan to use the money to return money to BAAC is an issue because the government has never planned to use a program for BAAC in the past, the chairman of the Economic Development Committee questioned. How to pay off all BAAC loan?

Mr. Baffum explained that compensation is in the hands of the government. The government has integrated with BAAC from time to time. However, the use of BAAC should provide flexibility to the government. What it will be at the end of the year cannot be determined today. Because we have not yet seen the cash flow or revenue collection in each period.

“BAAC is under the Ministry of Finance. BAAC has discussed various schemes to use, loan management and deposit management, cash flow, repayment, various loans. So don't worry. But let's look at it in a bigger frame. There is no risk if that limit is not crossed.

On whether or not BAAC's financial stability would be at risk, a senior TDRI academic explained to BBC Thai that generally, if the government allows BAAC to do the work, the government will also guarantee the loan.

This loan is determined in accordance with Section 28 of the Finance and Financial Conduct Act: the government department will later repay the money with interest, so as not to increase financial stability risk for BAAC. Because it will be reused by the government in the future

From the documents analyzing the financial burden position as per Section 28 of the State Fiscal Discipline Act 2018 of the Secretariat of the House of Representatives, BAAC was found to be an implementing agency of 20 government schemes in 4 ministries including the Ministry of Finance. . Ministry of Industry Ministry of Commerce Ministry of Agriculture and Co-operatives found that every scheme involves providing credit to farmers. Loans to increase cash flow Production cost support Income guarantee Maintaining stability of agricultural commodity prices etc.

Schemes like the annual rice insurance scheme are being implemented regularly. Fodder maize insurance Guaranteed income for rice farmers Guaranteed income for cassava farmers and guaranteed income for fodder maize farmers.

Budget requests from various agencies seeking Cabinet approval between 2018 and 2022 continued to increase from 88,000 million baht to 195,000 million baht in fiscal year 2022.