Deal agreed on Thai bonds

The central bank will redeem the principal through profits from its currency reserve after 2002, and a separate account will be set up within the Bank of Thailand's to keep such profits and to ensure transparency and accountability of this operation, said the statement from the Bank of Thailand. The money will be used to finance the estimated 1.4 trillion baht ($33 billion) liabilities of the Financial Institutions Development Fund, which was set up after the 1997 financial crisis to rescue financial institutions that collapsed under the weight of non-performing loans.

As a rescue fund, the FIDF had provided full guarantee to depositors and certain creditors as well as assisted the re-capitalisation and rehabilitation of the banks.

The government will at first issue 300 billion baht ($7 billion) savings bonds from July 15 in five, seven and ten-year maturities carrying interest rates of 4%, 5% and 6% respectively, the statement said.

The remaining bonds worth 480 billion baht ($11 billion) are likely to be offered in two tranches in 2004 and 2006 but it will depend on the market conditions at the time whether the full amount will be offered and if it will be sold in the secondary market or directly to the public.