The Cabinet, during its meeting on 19 March 2013, approved a draft bill empowering the Ministry of Finance to borrow two trillion baht to finance transportation and logistics mega-projects.
The two-trillion-baht loan will be secured gradually over the next seven year, until 2020.
The Cabinet also approved criteria for budget allocation to repay the loan within the next 50 years. The loan repayment, with a grace period of 10 years, will begin in the 11th year after the bill takes effect. The Government will set aside a fund accounting for 2-3 percent of the loan for annual repayment.
It has worked out three strategies for the planned investment in the infrastructure mega-projects. The first strategy seeks to develop lower-cost road transport. The second strategy calls for infrastructure development to facilitate travel and build transportation networks in the centers of all regions of Thailand, connecting with neighboring countries. The third strategy seeks to upgrade the transport system for greater flexibility, which will lead to GDP growth of one percent a year and generate job opportunities for 500,000 people.
Government Spokesman Tossaporn Sereerak said that the Government would maintain fiscal discipline to ensure that debt repayment would not exceed 15 percent of the annual national expenditure. He said that Thailand might suffer a trade deficit from imports of capital goods for use on the transport and logistics mega-projects. However, fuel imports would drop and transportation costs would decline by 2 percent. As a result, Thailand is likely to save 100 billion baht a year from oil imports.
In addition, the Government would ensure that the public debt would not exceed 50 percent of GDP. The next step is that the bill will be submitted to the House of Representatives for consideration in March. It is expected to pass in Parliament by September 2013, so that construction will begin as planned.
Prime Minister Yingluck Shinawatra stressed that the Government would ensure transparency in the mega-projects. A House committee would also be formed to monitor the implementation of the projects.
She said that the Government opted to borrowing instead of funding the projects through the spending of the annual budget, since it could not set aside an enormous amount each year for the investment. If there were changes in the government, the investment projects might be affected or their continuation might be disrupted. The issuance of the bill would create confidence among investors, as it would be made clear that the plan must continue.
She said that the loan would be obtained mainly from domestic sources. The Ministry of Finance would consider the plan for borrowing. When the draft bill on the two-trillion-baht loan is forwarded to the National Assembly, the Prime Minister said that she was ready to give an explanation to Parliament and other related agencies would also be ready give details.