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Project Funding For Infrastructure Development

in Bangkok Financing Needs


Meeting Government’s
in Turbulent Times

Mr. Tada Phutthitada


Director of Bond Market Development Bureau
Public Debt Management Office (PDMO)
MINISTRY OF FINANCE

November 3rd , 2009, Kuala Lumpur,Malaysia,


Financial Crisis triggered series of stimulus measures,
resulting in significant increase in funding needs

Stimulus Measures Total Borrowing Requirements (2008-2010)


2009 1) SP1:Supplementary budget : 97 BTHB B THB
900 851
2) Revenue shortfall : 94 B THB 800

Borrowing ceiling reached: 700 677 320


20% of budget/ expenditures 80
600
94
500
2009 – 3 ) SP2: Investment in infrastructure 97
400
2012 projects: 1.4 T THB 350
– Ceiling for borrowings reached 300 273 249
but further stimulus needed
– Additional off budget funding 200 165
approved : 800 B THB
100 157 181
– Borrowings spread over 4 years: 108
- 2009 : 80 B THB 0
- 2010: 320 B THB 2008 2009 2010
- 2011: 300 B THB
- 2012: 100 B THB Debt Restructuring Budget Deficit SP 1 Revenue Shortfall SP 2
1
Well equipped with tools enabling the government to
meet its funding need with acceptable cost & risk level

Objective Strategy
1 • Bond market development • Primarily used to finance budget deficit
Benchmark • Create benchmark yield curve • Institution / insurance
Bonds • Increase liquidity in secondary market

2
• Maturity : 5, 10, 25 & 20 yrs
T-Bills • Short term instruments • Flexible tools for cash & debt
management
3 Saving • Alternative funding source • Broaden investor base
Bonds • Retail

4 Promissory • Alternative funding source • Non-collide with LB


• Flexible maturities
Notes (P/N)
• Banks
5FRB • Alternative funding source • Reduce interest rate risk for investors
• Institutional investors

6Linkers • Alternative funding source • Protect investor’s purchasing power


• Yet to be issued

7 • Projects financing • Bridge financing


• Reduce cost when disbursement
Bank Loans
uncertain
2
Responsive government measures introduced to meet
immediate funding requirements

Pre Crisis Crisis Recovery?


FY2008 FY2009 FY2010
GDP F: 5.5-6.0% GDP F: (0.5)-0.5% GDP (f) F: 2.5-4.1%
A: 2.6% A: - 3.5% A: N/A
Policy Rate 3.75% Policy Rate 1.25% Policy Rate (f) 1.25%

Event Inflation 5.5% Inflation -0.8% Inflation (f) 2.5%

Public 23.50% Public 27.29% Public 24.93%


Expenditures/ Expenditures/ Expenditures/
GDP GDP GDP (f)
Public 36.2% Public 47.2% Public 52.4%
Debt/GDP Debt/GDP Debt/GDP (f)
• Strategies centered around • Utilise short term instruments • Strategic implementation of
supporting the development to urgently meet immediate projects financing:
of bond market : funding requirements: – Bank Loans: used as
– LB : 5, 10, 15 & 20 – T-bills bridge financing, convert
Response
– 1st launch of 30 yrs – LB: 2 & 3 yrs into P/N and/or LB
• Issuance of Saving bond
3
Responsive government measures introduced to meet
immediate funding requirements

Maturity Amount 2008 2009 2010


Tools (Yrs) (B THB)
Strategy
Benchmark Bonds 5 72
Benchmark Bonds
10 53
• Issuance of 5, 10, 15, 20 years to:
15 24 – Establish benchmark yield
20 24 – Liquidity in the secondary market

30 5
• First launch of 30 yrs LB
FRB – Alternative maturity
Non-Benchmark Bond 2 – Meet demand from long term investors
– Market development : extend yield curve
3 13
8 10
12 8
14 15
Saving Bond 18
P/N >5 31
T-Bill
Bank Loans >5
TOTAL 273 4
Responsive government measures introduced to meet
immediate funding requirements

Maturity Amount 2008 2009 2010


Tools (Yrs) (B THB) Strategy
Benchmark Bonds 5 74
Benchmark Bonds
10 63 • Continued issuance for bond market
15 27 development
20 38 • Amount is maintained at similar level to 2009

30 6
Short term Instruments (LB: 2 & 3 yrs +
FRB 22 T-Bills)
Non-Benchmark Bond 2 88 • Urgent need of funding to stimulate economy
3 50 • Interest rates on downward trend
8 • More demand for short term instruments because
of measure to lengthen credit guarantee
12 16
14 FRB
Saving Bonds 80 • Reduce interest rates Miss-match
P/N >5 80 • Meet demand from investors
T-Bill 134
Saving Bond
Bank Loans >5
• Increase amount to meet growing demand
TOTAL 677 5
Responsive government measures introduced to meet
immediate funding requirements

Maturity Amount 2008 2009 2010


Tools (Yrs) (B THB)
Benchmark Bonds 5 143
Strategy
10 69 Benchmark Bonds
• Continued issuance for bond market development
15 42
• Amount maintained at similar level to 2009
20 42
• 5 yr increased to 2 series
30 18
FRB 36 No Short Term Instruments
Non-Benchmark Bond 2 • Lengthen duration
3
SP2 Financing
8 30
• Bank Loans(1-10yrs) : 120 B THB
12 –More flexible as projects disbursements very
uncertain
14
– Converted in P/N +4 yrs and/or LB
Saving Bonds 94 • P/N (> 5 yrs) : 130 B THB
P/N >5 57 – Products diversification
T-Bill • Saving Bond (> 5 yrs) : 70 B THB
– To meet growing demand
SP2 Financing* >5 320
TOTAL 851
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