For Thailand’s Debt-Ridden Farmers, A Moratorium Is Not Enough

By Jitsiree Thongnoi

In Yasothon province in northeastern Thailand, Anon Ngiwlai has tilled the soil for decades, while relying on government-backed loans to purchase land, cattle, fertilizer and farm vehicles.

Just last year, he obtained yet another loan from the Bank for Agriculture and Agricultural Cooperatives, almost entirely owned by the Thai government, to buy a tractor priced at 1.2 million baht (U.S. $32,000). In March, Anon paid back a fraction of the loan, but at the current rate, it will be another eight years before he clears the debt.

By then, he’ll be 73, well into his retirement years.

Anon, like many Thai farmers, is drowning in debt but ineligible for a three-year moratorium program announced by the new civilian-led government of Prime Minister Srettha Thavisin.

Critics say the program aims to placate a key voting bloc of Srettha’s ruling Pheu Thai Party without addressing the underlying factors that drive the indebtedness crisis among the country’s farmers.

“It’s as if you’re looking after the patient without actually curing him,” said Aat Pisanwanich, a professor of economics based in Bangkok.

The program offers a reprieve from loan repayments for farmers who carry debt with government banks of 300,000 baht ($8,351) or less. That means it’s only accessible to about one-third of Thailand’s 8 million farmers who took out government loans.

The average farmer household owes 450,000 baht, according to the Puey Ungphakorn Institute for Economics Research, a Thai think-tank. Its research also suggests that 57% of indebted farmers have no means to settle their loans in full.

Paopoom Rojanasakul, a deputy secretary general at Pheu Thai, defended the program, explaining that the initiative primarily aims to assist small-scale farmers.

“We think it is necessary to focus the policy on the most affected group of farmers first,” he said.

‘Populist policies’

Prime Minister Srettha earlier argued that the program’s objective was to uplift farmers’ morale and provide them with a breather to get back on their feet.

Previous governments introduced similar initiatives, allowing farmers to halt loan repayments temporarily, but these efforts seldom helped them break the relentless cycle of debt.

Thailand has long grappled with its sky-high debt problem. Roughly a third of its 71 million population is in debt, with the collective amount nearing 90% of the country’s annual economic output, according to the Bank of Thailand.

While a significant portion of this debt stems from auto and housing loans, escalating debt among farmers also appears to be fueling the crisis: Over the past eight years, debt in farming households surged by 75%.

While a simmering debt problem threatens the country’s financial stability, Srettha has embarked on a plan to ramp up government spending. He argues this will stimulate the Thai economy, which has seen an average growth rate of just under 2% over the last few years.

The farmers’ debt moratorium program, which is projected to cost the government $908 million, is among a host of “populist” programs his government has introduced since it assumed power in August.

The flagship is a $15 billion program to roll out digital wallets, each filled with credit equivalent to $300 for every eligible citizen, as a means to invigorate Thailand’s stagnant economy.

Like other schemes announced by the new government, the program is reminiscent of the cash giveaways that propelled the popularity of former Pheu Thai Prime Minister Thaksin Shinawatra in the early 2000s.

Other plans on the table include subsidizing household energy bills and extending an ongoing moratorium on loans for small and medium-sized enterprises, teachers and police officers.

Aat, the economist, said these policies would require significant budgetary support from the government, which might help boost the economic output because of the increased spending but will do little to help the beneficiaries get out of debt.

‘Even worse than the rice-pledging scheme’

Achin Chunglog, president of the Debtors’ Rights Reform Foundation, a nationwide network of volunteers promoting fiscal responsibility, argues that the moratorium program should have targeted only those with no means to pay off their loans.

“The moratorium is introduced for debtors who still have the capacity to pay off. These debts are not non-performing loans,” she said.

Achin compared the program with the “rice-pledging” scheme introduced by Yingluck Shinawatra, a former Pheu Thai prime minister and Thaksin’s sister, under which the government purchased rice from farmers at a rate higher than market prices.

In 2017, Yingluck was found guilty of negligence in administering the program after she was ousted by a military coup in 2014. The trial was controversial because of its political nature and the coup, but few dispute that the scheme – dependent on billions of U.S. dollars in government subsidies and marred by corruption allegations – had a disastrous impact on the economy.

“I’d say that this debt moratorium scheme is even worse than the rice-pledging scheme,” Achin told BenarNews.

Many trapped in debt

Thailand has long been an agricultural powerhouse; it’s one of the world’s top producers and exporters of rice, durian, and rubber.

But the Southeast Asian nation’s success has come at a stiff price for farmers, many of whom are caught in a cycle of “immortal debt,” said Witoon Lianchamroon, who runs BioThai, a non-profit that advocates for sustainable agricultural practices.

“Thirty-five percent of the loans taken by farmers are spent on fertilizers and chemicals. Another 15 percent is on seedlings,” he told BenarNews. “They always fall into the same cycle as they are trapped within monoculture.”

Fertilizer prices grew over 11 times compared to 50 years ago, according to an analysis by the Bank of Thailand, and a farmer household earns about 260 baht ($7.25) a day, much below the average daily wage in Thailand at 337 baht ($9.40) as of 2022.

Witoon said past governments had subsidized agricultural prices as a way to guarantee farmers’ income, but structural issues like land ownership were rarely addressed.

In Thailand, many farmers don’t own the land where they farm.

In the northern Chiang Rai province, however, farmer Somsak Yoinchai has a rare success story to tell.

He took out a loan from a government-backed bank 20 years ago to start growing longans, a wildly popular fruit in the region.

But Somsak soon realized his mistake: a farmer needed to wait three to five years after planting the trees before he could harvest the fruit.

“In the initial years of growing longan, I was in financial difficulty. I had to pay for my children’s school fees and had to rely on income from growing garlic and cabbage for survival,” the 62-year-old told BenarNews.

As he was unable to keep paying loan installments, he found himself in legal trouble with the bank.

It was only in recent years that Somsak diversified his crops and began to see success.

“I now grow herbs like turmeric, ginger and lemongrass,” he said. “I make essential oils out of them and I supply them to many spas and massage houses.”

The key to solving the crisis, suggested Aat, the economist, is aligning farmers to market dynamics, where profits are determined by supply and demand rather than government interventions such as cash handouts or subsidies.

“If you want to cure the sick man – in this case, the Thai farmer – you have to help him increase his produce, reduce costs, and adapt according to the consumer trend,” he said.