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THAILAND’S government is weighing a plan to raise about US$1 billion from the global market via what would be the country’s first foreign-currency sovereign bond sale in two decades.
The Finance Ministry aims to wrap up a cost-benefit analysis and other steps for the offering for the government to take a decision by May, according to Public Debt Management Office director-general Patchara Anuntasilpa. Such a deal is meant to provide a benchmark for Thai companies tapping the overseas markets for their funding, he said.
Authorities in South-east Asia’s second-largest economy have preferred raising the billions of US dollars it requires annually to bridge a budget gap and fund investments locally because of low interest rates. In 2022, the debt office shelved a planned US dollar bond offering partly due to market volatility. But Prime Minister Srettha Thavisin, who took office six months ago, has pitched for overseas bond sales to allow global funds to finance sustainable projects.
“The most likely choice will be US dollar-denominated bonds as it’s a widely used currency and benchmark,” Patchara said on Wednesday (Feb 14).
Deputy Finance Minister Julapun Amornvivat said last month that authorities were carefully evaluating the sale of notes denominated in US dollars, yen or yuan with a target to issue them over the next one to two years. While the borrowing cost of dollar-priced bonds will be higher, it would be cheaper or on par with local costs if they are denominated in yen or yuan, he said.
10-year US Treasury notes carry a yield of about 4.24 per cent, compared with 2.55 per cent for similar tenor sovereign baht notes and 2.43 per cent on yuan-priced Chinese government bonds. The all-in-cost of bond issuance by Thailand in any currency including in yen will be higher than local rates as it will include foreign exchange and other fees, Patchara said.
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“It’s very challenging as the funding cost locally is cheaper and more convenient, so we need to convince people why we need to do it the hard way,” Patchara said. “We should still go ahead with the plan to set a benchmark for the nation.”
The proceeds from any international bond sale will likely go to finance sustainability-linked projects as they add value to the economy, Patchara said. Srettha last year met BlackRock chief executive Larry Fink and urged him to consider investing in sustainable bonds issued by the government.
Currently, foreign-currency debt accounts for only 1.8 per cent of total Thai government debt and it is mostly in the form of loans from multilateral agencies. Thailand’s state borrowing is estimated at 2.4 trillion baht (S$89.5 billion) in the fiscal year that began on Oct 1. BLOOMBERG
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