Bangkok, Nov 4 - The Thai government plans to raise funds from four domestic banks to pay for a rice intervention scheme, a senior official said on Tuesday after a cabinet meeting.
Deputy Finance Minister Pradit Pataraprasit told reporters that 110 billion baht ($3.2 billion) would be needed for the plan, under which it will buy rice from farmers at a price some way above the current market level.
"We need to raise money as soon as possible as our duty is to prevent rice prices from falling," Pradit said.
Formally, the loan would be taken by the state-owned Bank of Agriculture and Agricultural Cooperatives and it would be guaranteed by the government, he said.
Interest on the loan would be paid by the ministry with the help of an already announced increase in government spending, he added.
The government said last week it would raise spending in the fiscal year from Oct. 1 to support economic growth. That is forecast to push the budget deficit up to 3.5 percent of gross domestic product from 2.4 percent in the original budget.
The cabinet approved the plan on Tuesday.
Krung Thai Bank, Siam City Bank, TMB Bank and the Government Saving Bank will provide the loan.
The intervention scheme began on Nov. 1. The government is paying farmers 12,000 baht per tonne, which compares with market prices of around 9,000 baht.
The intervention price equates to an export price of around $630-$640 a tonne free on board.
The price of Thailand's benchmark 100 percent B grade rice fell to $580 per tonne last week and was likely to drop further, traders said.
The government has said it would buy 8 million tonnes out of a main crop forecast to be 23.8 million.
Some traders say the scheme is unlikely to provide much support as the government has limited capacity to buy and is anyway adding to supply.
"It won't help drain supply out of the market because the government is selling rice from its stockpiles," one trader said.
The government said on Monday it planned to sell 3.1 million tonnes of its 4.3 million tonne stocks through a tender on Nov. 5 to prepare space for the current intervention scheme.
"Dumping 3.1 million tonnes on the market ahead of the harvesting season because they want to buy 8 million tonnes to help support prices -- it doesn't make sense," one exporter said. ($1=34.96 Baht)