BANGKOK: Thailand’s government reversed a cut in the rice intervention price on the day it took effect, giving in to farmers who had threatened protests and undermining a cabinet reshuffle meant to move past the controversy surrounding the scheme.
Thai rice export prices, which had fallen sharply yesterday morning as the intervention price cut kicked in, are likely to jump again to a level that makes it unlikely the government will be able to sell off its massive stockpiles.
This will keep up pressure on state finances from the scheme, which rating agency Moody’s warned last month could jeopardise a target of balancing the budget. The rice intervention caused losses of $4.4bn in the year to September 2012.
“It will accumulate untenable fiscal risks because the scheme plays with world market prices that Thailand cannot control,” said Thitinan Pongsudhirak, a political scientist and professor at Chulalongkorn University.
“If the government keeps on this track, they will look like they are desperate,” he added.
The national rice committee, made up of government officials and industry representatives and chaired by Prime Minister Yingluck Shinawatra, had decided to push the price back up to 15,000 baht ($480) a tonne from 12,000 baht, Finance Minister Kittirat Na Ranong told reporters.
He said the government estimated there was not much rice left with farmers from their second crop, which is marketed until late September, so it would not be a huge burden on the budget to continue to buy at 15,000 baht a tonne.
“Everything is still going according to our plan and the framework we set out, and it should not be a problem,” he told reporters.
The 20 percent cut in the price that became effective on Monday had pushed the export price of 5 percent broken rice down to $480 a tonne, the lowest level since June 2011 but still well above world prices.
“We don’t know where prices should be now. We may have to wait until the dust settles before offering prices again,” said Chookiat Ophaswongse, honorary president of the Thai Rice Exporters Association. “But what we know for sure is that this government has no credibility at all.”
Vichien Phuanglamjiak, vice-president of the Thai Rice Farmers Association, said farmers would march to Government House on Tuesday to give Prime Minister Yingluck Shinawatra flowers to express their gratitude.
“Farmers feel glad she still cares about them,” he said.
The rice-buying programme has already caused political casualties: the commerce minister was sacked on Sunday because of the cost of the scheme and his repeated failure to be open with the public about the losses.
Yingluck replaced Boonsong Teriyapirom with Niwatthamrong Bunsongphaisan, a government spin doctor who was given the additional position as deputy prime minister.
Economist Chester Liaw at Forecast Pte in Singapore said the government still had some explaining to do after justifying the price cut in June by the state of the global market, which had not changed.
“It remains to be seen what their long-term plan is but for the moment, the target of moving into a balanced budget by 2017 is seriously in doubt,” he said.
Reuters
