Professor Dr. Kriengsak Chareonwongsak The problems of

The problems of the farmer would remain unresolved

Extending a debt moratorium or unrealistically cheap credit would not really solve the problems of rural poverty, since credit is only a tool. The deeper problems would have to be solved. Farmers lack up-to-date know-how about agricultural technologies and most have never learned about, or even taken informal courses on, farm management. Most farmers do not own their own land and the facilities for developing the agricultural sector are not in place. Furthermore, there are no proper mechanisms to stabilize prices of agricultural products, and if farmers were given a reprieve on repaying their debts, they would encounter the same problems as before.
A debt moratorium should be used for some groups of farmers only. It would be appropriate for those farmers whose income is below the poverty line, those who have debts caused by poorly advised and badly proposed state projects, those with production and marketing problems or those with debts caused by a natural disaster or some other unavoidable calamity.
Debt moratorium may be a short-term, stop-gap measure, but the overall result of such a measure could only be negative, not only for the farmers but for the whole Thai nation. There are other ways to help this core group of Thai citizens achieve a viable livelihood and participate in nurturing sustainable development of the nation. Solutions to the problem of farm debt should not focus just on debt moratoriums or some other means of across the board debt cancellations. Instead, there should be a more concerted effort at improving the competitiveness of Thailand’s agricultural sector and generating sustainable income in the farming sector.

Farm debt moratorium more trouble than it’s worth
 Professor Dr. Kriengsak Chareonwongsak
Executive Director, Institute of Future Studies for Development
kriengsak@kriengsak.com, http://www.ifd.or.th

Professor Dr. Kriengsak Chareonwongsak A debt moratorium

Funding for the agricultural sector would dry up
Government intervention in Africa and South America resulted in many agricultural financial institutions being forced into bankruptcy. Similarly, forcing Thailand’s BAAC to announce a moratorium on some of its debts would be highly risky as the government has limited resources to cover the expenses of such a move. Financial institutions would come under greater pressure as many farmers took advantage of the situation. Under such conditions, creditors and depositors would lose confidence in BAAC, creditors would recall their money and depositors could withdraw their money in a panic. The BAAC would then be placed in a liquidity squeeze as 76% of all BAAC monies comes from personal deposits. Other financial institutions would no doubt hesitate to extend credit to farming clients under such conditions.
A debt moratorium would ultimately come back to bite farmers themselves. Since 92% of all credit extended to the agricultural sector comes from the BAAC and commercial banks, they would be unable to provide loans for farmers, causing a lack of funding for rural development and agricultural sector liquidity. Even if farmers have other sources of funding, they must still provide collateral for such loans. In the end, poor farmers would be cut off from all sources of funding.

Farm debt moratorium more trouble than it’s worth
 Professor Dr. Kriengsak Chareonwongsak
Executive Director, Institute of Future Studies for Development
kriengsak@kriengsak.com, http://www.ifd.or.th