BOT told: Scrap 30% measure
The Nation (10 October 2007)
The Public Debt Management Office has suggested the Bank of Thailand revoke its 30-per-cent withholding measure, in order to reduce funding costs on bond issues. Director-general Pongpanu Svetarundra yesterday said the bond curve was currently quite steep, due to a wide gap between the short-term and long-term deposit rates. If the central bank allowed foreigners to invest in the country's bond market, the spread would be narrower, and this would lower funding costs on bond offerings. "As the 30-per-cent reserve requirement is a temporary measure, using it for one year is enough," he said. "However, a decision on the issue depends on the Bank of Thailand, mainly because it's the monetary policy-maker." Pongpanu said the country's economy was expected to improve after the December 23 general election. A new government would possibly expand government investment, particularly on infrastructure mega-projects, so the Public Debt Management Office is preparing for fund mobilisation. The office will consider raising funds from several sources, including the domestic money and bond markets and foreign financial institutions. He said the Finance Ministry was still in the process of negotiating with the Japan Bank of International Cooperation to finance the Purple Line mass-transit system. The deal is expected to be complete later this month. Meanwhile, the Public Debt Management Office has appointed Bangkok Bank as the sales agent for government saving bonds with a three-year maturity during fiscal 2008. The bonds have a combined value of Bt6 billion. The Finance Ministry will also issue government bonds with five to 20 years' maturity this year. The proceeds will fund the budget deficit for the current fiscal year, which began on October 1. Pongpanu said the ministry's bond-issue schedule would be subject to auction every two months. Five-year, 10-year and 15- to 20-year bonds will be issued, with a total value of Bt80 billion, Bt60 to Bt80 billion and Bt20 to Bt30 billion, respectively. With interest rates remaining low, government bonds will attract investors. Moreover, he believes the country's policy interest rate is still on a downward trend.
The Nation (10 October 2007)
The Public Debt Management Office has suggested the Bank of Thailand revoke its 30-per-cent withholding measure, in order to reduce funding costs on bond issues. Director-general Pongpanu Svetarundra yesterday said the bond curve was currently quite steep, due to a wide gap between the short-term and long-term deposit rates. If the central bank allowed foreigners to invest in the country's bond market, the spread would be narrower, and this would lower funding costs on bond offerings. "As the 30-per-cent reserve requirement is a temporary measure, using it for one year is enough," he said. "However, a decision on the issue depends on the Bank of Thailand, mainly because it's the monetary policy-maker." Pongpanu said the country's economy was expected to improve after the December 23 general election. A new government would possibly expand government investment, particularly on infrastructure mega-projects, so the Public Debt Management Office is preparing for fund mobilisation. The office will consider raising funds from several sources, including the domestic money and bond markets and foreign financial institutions. He said the Finance Ministry was still in the process of negotiating with the Japan Bank of International Cooperation to finance the Purple Line mass-transit system. The deal is expected to be complete later this month. Meanwhile, the Public Debt Management Office has appointed Bangkok Bank as the sales agent for government saving bonds with a three-year maturity during fiscal 2008. The bonds have a combined value of Bt6 billion. The Finance Ministry will also issue government bonds with five to 20 years' maturity this year. The proceeds will fund the budget deficit for the current fiscal year, which began on October 1. Pongpanu said the ministry's bond-issue schedule would be subject to auction every two months. Five-year, 10-year and 15- to 20-year bonds will be issued, with a total value of Bt80 billion, Bt60 to Bt80 billion and Bt20 to Bt30 billion, respectively. With interest rates remaining low, government bonds will attract investors. Moreover, he believes the country's policy interest rate is still on a downward trend.
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