Tuesday, March 8, 2011

Professor Kriengsak Chareonwongsak Farm debt

Professor Kriengsak Chareonwongsak Farm debt moratorium more trouble than it’s worth

Farm debt moratorium more trouble than it’s worth

Executive Director, Institute of Future Studies for Development
However, jumping into just any debt moratorium plan could be a highly dangerous move, causing more harm than good. The consequences of choosing the wrong strategy could be severe, affecting not only Thailand’s farming community, but the entire economy as well. The following are some of the possible repercussions of using the wrong debt moratorium strategy:

Responsible attitudes towards debt repayment would be eroded
    Introducing debt moratorium for problem farm debts could destroy the good debt repayment habits of farmers, most of whom do make an honest effort to repay their debts. If debt moratoriums were introduced, farmers would no longer have to repay loan interest, at least for some time. This move would create animosity, as good debtors would hold such action as unfair. As well, some farmers may intentionally try to default on their payments to benefit from the debt reprieve – a response that has already occurred towards government non-performing loans (NPLs) amnesties offered in the banking system. People tend to become lax about their financial commitments under such conditions, which causes a rise in the number of strategic NPLs.
Disbursing government grants to indebted farmers would nurture the attitude that government loans are given without the need to repay. This ‘gold lining’ of debt moratorium promises, given by many political parties, is so alluring that some farmers have already stopped making debt payments; a condition that is a forewarning of the dangerous attitudes that could result if a debt moratorium is actually implemented. 

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