Japan prepares to provide $500m soft loan

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Japan plans to provide a subsidized loan of $500 million (about 16.6 billion baht) to Thailand to ease the impact of the pandemic, said Patricia Mongkhonvanit, director general of the Office of Public Debt Management. (PDMO).

Ms. Patricia said the soft loan will be provided through the Japan International Cooperation Agency as part of Japan’s plan to offer financial assistance to many countries suffering from the impact of the pandemic.

The project provides a 15-year soft loan equivalent to $500 million in yen to beneficiary countries with an interest rate of 0.01% and a grace period on principal payment of four years.

The Japanese government is expected to give final approval for the loan at the end of this month.

Thailand’s cabinet has approved spending of around 400 billion baht out of a total of 500 billion the government is allowed to borrow under the second emergency lending decree to cushion the impact of the pandemic on Thailand’s economy .

Of the 400 billion baht, 76.5% has been disbursed.

The country’s public debt to GDP ratio is 59.9%.

If the government borrows the full 500 billion baht, the debt ratio will rise to 62% by the end of fiscal 2022, assuming the economy grows this year in a range of 3.5 to 4, 5%.

Ms. Patricia said whether the remaining 97 billion baht the government is allowed to borrow in the second decree is enough to handle the impact of the pandemic depends on the spread of the virus over the next few months.

She said the government was not considering borrowing more so far.

PDMO plans to offer amortized bonds in the range of 15-25 billion baht with a 25-year maturity for institutional investors. The proceeds can help offset the country’s budget shortfall in fiscal year 2022, Ms. Patricia said.

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