BANGKOK – Thailand’s ruling Junta (National Council for Peace and Order) revealed plans Tuesday to provide $312 million in loans to help its financially strapped farmers, many of whom are in debt to loan sharks, in the latest step by the military junta to help boost the economy.
Loan sharks, who charge as much as 60% in interest a year, have thrived amid growing household debt, which rose to 82.3% of gross domestic product this year.
Economists are concerned Thailand’s high household debt will reduce consumption, a major engine driving the country’s economic growth.
Thai rice farmers in particular were hurt after a botched rice subsidy program resulted in many not being paid. By extending the loans, the military government hopes to relieve farmers from their deep indebtedness so they can eventually spend more comfortably.
Loan-shark debts represent 49.1% of the country’s household debt, said Somsak Kangteerawat, a vice president of the Bank for Agriculture and Agricultural Cooperatives, citing the latest survey by the University of the Thai Chamber of Commerce.
“The bank has set up a budget of 10 billion baht [$312 million] to help farmers and their family members resolve their debt problems,” Mr. Somsak said.
Each borrower can apply for a loan of not more than 100,000 baht—or $3,125—at an interest rate of 12% a year, according to the bank’s vice president. The loan must be paid back within 10 years.
The yearlong loan program, which begins Sept. 1, aims to help about 150,000 farmers, Mr. Somsak said.
Economists praised the loans.
“This shows the government’s determination to tackle the problems of farmers’ debts,” said Amonthep Chawla, head of research at CIMB Thai Bank.
The government is working to identify root causes of high debts owed to loans sharks and others outside the formal lending system, said Rungson Sriworasat, permanent secretary to the Finance Ministry.
After months of political stability in Thailand, the military seized power in May, investing in infrastructure projects and implementing a series of other policies that have been credited with helping to pump up the weak economy.
In this year’s second quarter, the country’s economy rebounded after contracting in the previous quarter, expanding 0.4% year-over-year and 0.9% on-quarter.
Corrections & Amplifications
The last name for Somsak Kangteerawat was incorrectly spelled as Kanteerawat in an article Tuesday about Thailand’s plans to provide loans for farmers.