BANGKOK (Reuters) - Thailand’s government has drawn up a 300 billion baht ($9.4 billion) plan for water management and flood prevention schemes along the Chao Phraya river basin to prevent a repeat of devastating floods last year.
Outgoing Finance Minister Thirachai Phuvanatnaranubala has said another 50 billion baht could be spent on 17 related river basins and other infrastructure.
Here are key points:
* The Chao Phraya river basin will be divided into two areas. The first area of 35,000 sq km is most vulnerable to floods. It is home to 18 million people, with 80 percent agricultural land and the rest for residential, commercial and industrial use, a statement from the Deputy Prime Minister’s office showed.
The second area of 123,000 sq km is outside the flood zone. It is home to 7 million people, living mostly in forest and agricultural areas and less likely to be badly flooded.
* A 10 billion baht plan for forest restoration and conservation plus the construction of dikes along upstream areas of the Ping, Nan, Wang, Yom and Sakae Krang river basins. The Ping and Nan are main tributaries of the Chao Phraya, which flows from north to south through Bangkok.
* 50 billion baht to build reservoirs along the Yom, Nan, Sakae Krang and Pa Sak river basins.
* 60 billion baht to convert 2 million rai (800,000 acres) of Chao Phraya plains farmland for the retention of 6-10 billion cubic metres of floodwater.
* 120 billion baht for the construction of floodways and flood diversion channels allowing flows of at least 1,500 million cubic metres per second. Immediate work this year would include the enhancement of dikes, sluice gates and canals.
* 50 billion baht for city and land use planning.
* 7 billion baht for “the enhancement of rivers and dikes.”
* 3 billion baht for database and warning systems and the establishment of related organizations.
* On January 10, the cabinet approved a decree that authorizes the government to seek funding of 350 billion baht ($11 billion) for projects that involve rebuilding and flood prevention work.
As a comparison, the government’s budget deficit for the fiscal year to September 2012 was originally supposed to be 350 billion baht. The cabinet approved an increase to 400 billion in mid-October to allow it to spend more on reconstruction.
* Deputy Prime Minister and incoming Finance Minister Kittirat Na Ranong said at the weekend that some of the funding would come from overseas sources, with technical assistance, implying it would be a multilateral lender such as the World Bank.
However, he said most of the funding would come from local sources. He did not specify whether this would be from bond sales, bank loans or other sources.
He said 17 billion baht of the spending would be accounted for in the 2011/12 fiscal budget.
* He has said the borrowing would raise the ratio of public debt to GDP by just 2-3 percentage points. Debt is expected to rise to 43.5 percent of GDP this fiscal year from 41.03 percent in October. By law it can go as high as 60 percent.
* The cabinet also agreed to support the establishment of a flood-related insurance fund. The Finance Ministry would seek funding of 50 billion baht for this.
* In addition, the Bank of Thailand is empowered to provide 300 billion baht ($9.45 billion) in soft loans to help manufacturers and individuals hurt by the floods. The Bank of Thailand could ask commercial banks to provide 30 percent of the total, Kittirat said.
* To help with the funding, the government has, by decree, shifted responsibility for servicing 1.14 trillion baht ($35.9 billion) in debt owed by the Financial Institutions Development Fund (FIDF) to the central bank.
The FIDF is a special vehicle used to bail out banks during the Asian crisis. Its interest costs amount to more than 60 billion baht a year, paid until now from the fiscal budget.
The principal was already the responsibility of the central bank. It was supposed to pay this down from its profits, but in most recent years the central bank has made a loss.
The Bank of Thailand had opposed the transfer of responsibility.
Outgoing Finance Minister Thirachai has said the ministry would keep issuing bonds to roll over matured FIDF debt until the central bank came up with a plan to pay it off. About 340 billion baht of FIDF bonds will mature this year, he added.
Bank of Thailand Governor Prasarn Trairatvorakul has said the commitment to continue issuing government bonds to cover the FIDF debt ensured the central bank would not have to print money to cover it, which could have fuelled inflation.
Compiled by Ploy Ten Kate and Orathai Sriring; Editing by Alan Raybould