The Asian Development Bank announced Tuesday it will provide a $1.5 billion loan to Thailand to aid its response to the coronavirus pandemic.
Thailand´s Cabinet approved the borrowing plan at its weekly meeting, deputy government spokeswoman Ratchada Thanadirek announced separately. The loan agreement is expected to be signed by representatives of the multilateral bank and Thailand´s Finance Ministry by the end of this month.
The loan is being provided under the ADB´s COVID-19 Active Response and Expenditure Support Program, The Associated Press reported.
"It will help restore growth and set the stage for targeted private sector operations by ADB to support the government´s post-COVID-19 recovery, including priority areas such as infrastructure, trade, and supply chain finance," the bank said in a statement.
Interest on the loan is set at the six-month LIBOR rate plus 0.5%. In addition, Thailand must pay 0.15% per year as a commitment fee, which locks in the lending terms as long as there are undisbursed funds.
"The borrowing is a part of the 1.9 trillion baht ($61.1 billion) scheme approved earlier to stimulate the Thai economy," Ratchada said. "The Finance Ministry projects that the local monetary market will be more volatile in the near future. Local businesses will borrow much more to shore up their situation; meanwhile the government will also need take action to pop up local economy."
She said the government´s ratio of foreign currency debt to total public debt is still low. Consequently, the Finance Ministry proposed the plan so the government will not dry up the local money pool and instead leave it to the private sector which is in need of cash.
The ADB said it forecasts that Thailand´s economy will contract by 6.5% in 2020, compared to its December 2019 projection of 3.0% growth.