ECONOMY / PUBLIC FINANCES : Debt office revamp to improve management

ECONOMY / PUBLIC FINANCES : Debt office revamp to improve management.

WICHIT CHANTANUSORNSIRI

The Public Debt Management Office plans to restructure its operations to serve as the country's debt manager, according to director-general Pongpanu Svetarunvra.

''The PDMO must change to take more of a customer-based approach,'' he said. ''Our goal is to minimise long-term funding costs for the benefit of the country and to help build up the country's debt markets.''

Operations at the office will be restructured under three units. One will focus specifically on domestic and overseas borrowing by state agencies, a second unit will focus on domestic and overseas debt issued for state enterprises, while a third unit will concentrate on debt operations for other public agencies, including local administrations and independent agencies set up under the constitution.

A central office will serve all three primary units, and oversee functions such as strategic policy and planning, debt market development, state megaprojects and debt repayments.

Mr Pongpanu said the PDMO faced a heavy load for 2007, with debt issues required to cover the projected 146-billion-baht budget deficit and plans to refinance another 170 billion baht worth of treasury bills into long-term bonds.

The office will also negotiate with the Japan Bank for International Co-operation to arrange financing for the new mass transit megaprojects.

Mr Pongpanu said stable fiscal policies were critical for minimising the government's long-term borrowing costs.

''Fiscal policy must work to help ensure that inflation stays low. High inflation hurts the bond markets as investors shy away. And the Bank of Thailand needs to ensure stable currency rates as well,'' Mr Pongpanu said.

He said an independent central bank was also necessary to help ensure stable inflation rates and guard against political interference in monetary policy.

''It's been shown in many countries that interference in the central bank to force interest rates lower results in higher inflation, hurting the bond markets.''

The planned introduction of a new deposit insurance agency to replace the current blanket guarantee on bank deposits with a limited insurance programme would also help boost the bond markets, Mr Pongpanu said.

The PDMO's operations must not interfere with the workings of the market, he added. Transparency in the government's bond issue schedule was needed to help minimise disruptions in the market, while officials should consult closely with dealers to monitor market trends and needs, he said.

''Public debt management also needs to build a linkage between fiscal and monetary policy. Right now the two are clearly separated, although they are interlinked,'' Mr Pongpanu said.In the future, the PDMO may take over the responsibility for issuing government bonds, a role now managed by the central bank, he added.

Bangkok Post
Sunday January 14, 2007