Oil Fuel Fund seeks loan of B40bn

Oil Fuel Fund seeks loan of B40bn

Cash needed to subsidise oil prices

The Oil Fuel Fund has enough credibility for financial institutions to extend it loans to boost liquidity, enabling it to subsidise the domestic oil price, says deputy permanent finance secretary Theeraj Athanavanich.

However, financial institutions still need to consider the fund’s debt service capability before lending, he said.

The fund is in talks with state-owned banks for loans worth 30-40 billion baht, said Mr Theeraj.

Earlier he said these talks are expected to be concluded this month.

The fund is a key mechanism for stabilising the domestic oil price and would not borrow under normal circumstances, said Mr Theeraj.

When considering loans for the fund, financial institutions cannot apply the same criteria as when lending to normal businesses, he said.

As of May 15, the fund was in the red by 72 billion baht because of rising global oil prices.

It needs more capital to boost its liquidity in case the price of oil increases further, said Mr Theeraj.

He said it is possible financial institutions will extend loans to the fund for a term of 3-5 years.

The uncertainty involved in the lending centres around volatile global oil prices as it is impossible to predict how long prices will stay elevated, said Mr Theeraj.

The Finance Ministry forecast over the long term the price will stay between $80 and $90 per barrel, he said.

The government recently decided to cut the excise tax on diesel by 5 baht per litre from May 21 to July 20.

Part of the five-baht reduction is earmarked for subsidising the Oil Fuel Fund, with the remainder used to help cap the diesel price, said a ministry source who requested anonymity.