BANGKOK — Thailand’s government is scrambling to assuage worries that the country’s multibillion-dollar rice subsidy program could result in a larger-than-expected loss afterwarned that the massive spending on the project could undermine the country’s credit rating.
Prime Minister Yingluck Shinawatra ordered the country’s commerce minister to clarify the cost of the price-support program after a cabinet meeting Tuesday, while Nattawut Saikua, the deputy commerce minister, plans to hold a rally this Sunday in Phitsanulok in Thailand’s rice-growing heartland to reassure farmers about the program.
The controversy began when Moody’s on Monday cited local media reports that total losses for the program in the 2011 to 2012 rice-growing season could hit 200 billion baht, or around $6.6 billion. That is far higher than initial government estimates of a 70 billion baht to 100 billion baht loss for the program, which the government is continuing this year. Moody’s concluded that the alleged increase in spending could negatively affect Thailand’s Baa1 sovereign credit rating.
Commerce Minister Boonsong Teriyapirom on Wednesday said that a news conference will be held Friday to explain the government’s position.
The rice subsidy program was the centerpiece policy of Ms. Yingluck’s government after she was elected in 2011 and is designed to boost rural incomes by buying rice at 50% above market prices. Key officials have described the policy as an attempt to drive up global prices, too.
Instead, other producers such as India have emerged to knock Thailand off its perch as the world’s biggest rice exporter while major importers such as the Philippines have stepped up their own production. As a result, exports fell 35% by volume in 2012 and are expected to fall further this year.
“We have lost business to India and Vietnam as their rice is $150 to $170 a ton cheaper than ours,” said Chookiat Ophaswongse, honorary president of the Thai Rice Exporters Association.
Unless Thailand’s government is willing to sell its rice at a loss, then it will be difficult to sell any of it overseas, he said. And if Thailand does sell at a loss, it could adversely affect its budget deficit