The Bank of Thailand recommends sustainable ways to solve agricultural debt in the Northeast.

Khon Kaen, The Governor of the Bank of Thailand suggests a sustainable way to solve agricultural debt in the Northeast, which requires cooperation from all parties to work together to prevent new debt from increasing while gradually reducing old debt. However, the worrying thing is the high cost of living while income is lower than expenses. If the entire system is not solved quickly, the debt problem in all regions will not decrease, especially agricultural debt in the Northeast, which is concerning. Dr. Sethaput Suthiwatanaruput, Governor of the Bank of Thailand (BOT), said at the 2024 annual seminar of the Bank of Thailand, Northeast Office, on the topic of 'How to Solve Agricultural Debt in the Northeast in a Sustainable Way' that agricultural debt in the Northeast is a concern because the Northeast is an area for agricultural cultivation only 1-2 times a year and is a household that relies heavily on various sources of financial assistance. Therefore, if household debt is to be reduced, all agencies mu st cooperate and establish consistent guidelines because if we look at the proportion of Thai debt, it is as high as 91% of GDP, which is quite a lot and there is still room for it to increase. Debt reduction is also not easy because the debt has many components, such as the cost of living in various aspects, including food, goods, and others, which are increasing. Although the inflation rate is not as high as it should be, the cost of living has not decreased, resulting in insufficient income for household expenses. However, the BOT, although not the main agency for debt resolution, has tried to fully introduce new loans into the system, especially the SME business sector, since the COVID-19 outbreak until now. However, it is admitted that the overall economic problem has not fully recovered, making it impossible for financial institutions to fully introduce loans into the business system at this time. However, the BOT would like to thank the Ministry of Finance for helping some state financial institutions guarantee new loans for SMEs so that they can continue their businesses. Screenshot In addition, the debt ratio adjustment in some countries can reduce debt, but in Thailand, if debt is to be reduced, income must be adjusted to be in line with expenses. Although Thailand's debt ratio is as high as 91% of GDP, if income grows sustainably, it is believed that Thailand's debt ratio will gradually decrease. However, household debt, especially in the Northeast, is quite worrying. It can be clearly seen that in the past 10 years, income per person from work was 12,000 baht, but expenditure per person was 15,000 baht. Until now, expenditure from income is more than 5,000 baht, causing households in the Northeast to have more debt than income, which is very worrying. Although many parties have tried to solve old debts, income is still not enough to cover expenses. Therefore, the solution to debt must make expenses and income consistent and must be complete. 'The BOT believes that debt resolution for the entire sys tem must ensure that the cost of living and inflation are not too high, with 3 financial approaches to sustainable well-being: 1. Manage expenses, maintain price stability, and prevent inflation and cost of living from being too high; 2. Ensure sustainable income growth, build financial infrastructure, and create opportunities; and 3. Solve debt problems. Responsible and fair lending measures must therefore give importance to all aspects, not just debt resolution alone. Households that are most affected are grassroots households because they do not have sufficient assets. Therefore, debt resolution must be done in all aspects in the same direction. Even though we have asked for cooperation from financial institutions to help with debt relief and provide new loans to SMEs, these will only be short-term measures. Therefore, we must resolve the structural aspects of the entire system to make it strong,' said Dr. Setthaput. Dr. Songtham Pinto, Senior Director of the Northeast Office, said that from the income fi gures of farmers in the Northeast per household, it is around 160,000-180,000 baht per year or an average of less than 10,000 baht per month. However, if we look at the average expenses per household, it is much higher than the income. As a result, household debt in the Northeast is higher than other regions. Importantly, most household expenses are focused on paying off loans borrowed both in and out of the system, paying from gambling or playing the lottery, paying for share games and other expenses. Meanwhile, household income in the Northeast comes from rice cultivation or waiting for financial assistance from government agencies. Some years, it is more, some years it is less. It is not enough for living expenses and is not consistent. The financial source should be added to the production structure so that households have sustainable income. Therefore, if household debt in the Northeast is to be reduced, the structure in various aspects must be developed to be truly consistent with the Northeast. Dr. So mrasmi Chantrat, the Economic Research Institute, said that the current agricultural debt in the Northeast is not limited to the Northeast. More than 90% of farmers have debt. According to the data from the Bank for Agriculture and Agricultural Cooperatives, the average agricultural debt is growing rapidly per person, exceeding 500,000 baht. Even though it has decreased, new debts are created and not reduced. And will fall into the debt trap, making it more difficult to access credit until having to look for informal lenders instead. And another problem is that the basic information systems of each agency that provides loans to farmers are not connected. Therefore, the real information of each farmer who has debt is not known. There are both old and new debts until it becomes a large debt that cannot be paid off in full or can only be paid by interest. However, if debt resolution is to be sustainable for all parties, including state banks, farmers, and related agencies, a single system must be established be cause the debt suspension approach is not considered a long-term debt resolution. If we look at the past 8 years, the government has continuously implemented a policy of debt suspension for farmers, but the results are that most farmers' debts have not decreased, but have increased. Mr. Jakkraphong Mesaphan, Money Coach, said that although the debt suspension approach seems to be a good thing, the debt will not decrease and will become an increased burden because most farmers' income is uncertain and not enough for their family members. They also do not understand how to properly organize household spending after reducing their debts and plan their spending correctly because farmers usually receive a large sum of money, but when they spend it, instead of spending it gradually on each matter, they spend it all at once, making it impossible to repay the loan. Therefore, their debt does not decrease. Mr. Phasathon Muihebua, a farmer, village headman of Non Samran, a developer, said that he has debt with a gove rnment bank. He borrowed money to farm and paid in installments for 10 years, but has already paid for 3 years. He is a developer and will use the loan to develop economical farming through introducing an energy-saving system and using renewable energy alongside farming to increase income and reduce expenses until he can pay off the borrowed debt and it will be gone. However, in some areas, farmers often request loans, not to develop their farming but to use them to expand their houses and buy other things, which makes them unable to repay the debt to the bank until it becomes more debt than expenses. Source: Thai News Agency