# Thai government to issue US$1 billion foreign currency-denominated bonds

- Link: https://www.thailand-business-news.com/banking/128589-thai-government-to-issue-us1-billion-foreign-currency-denominated-bonds
- Published: 2024-02-29T14:56:17+07:00
- Author: Zhang Fang

The **Thai government** has recently announced its consideration to issue **foreign
currency-denominated bonds** valued at **US$1 billion**, approximately **36 billion
baht**. This announcement has sparked debates over the worth and risks associated
with such an undertaking.

If these bonds are released in **US dollars**, it would be a landmark occasion as
the first such issuance by the Thai government in **20 years**. The last instance
of foreign currency bond issuance took place in **2005**, when the government released**
48 billion yen** (equivalent to **US$318,794,400**) worth of three-year Samurai 
bonds to refinance a maturing loan from the Japan Bank for International Cooperation.

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## Key Takeaways

 * The Thai government plans to issue foreign currency-denominated bonds valued 
   at US$1 billion, with US dollars being the most likely choice due to their widespread
   use and benchmark status.
 * While foreign currency bond issuance offers a financing alternative for Thailand,
   it also exposes the country to exchange rate risk and higher borrowing costs 
   based on interest rates.

The **Public Debt Management Office (PDMO)** under the Finance Ministry is examining
the feasibility of offering these bonds in several currencies, including **US dollars**,**
yuan**, and **yen**.

According to PDMO director-general **Patchara Anuntasilpa**, the most likely choice
is **dollar-denominated bonds** due to its widespread use and benchmark status. 
The funds from any international bond sale would likely be used to finance **sustainability-
linked projects** that add value to the economy.

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However, issuing bonds overseas does come with drawbacks. It exposes Thailand to**
exchange rate risk**, making the repayment of international debt more costly if 
the baht devalues. Additionally, the cost of borrowing would increase based on interest
rates.

For example, **10-year US Treasury notes** carry an interest rate of **4.6%**, whereas
domestic bonds of a similar maturity period only carry an interest rate of **2.5%**.
Despite these challenges, international bonds present an attractive financing alternative
for Thailand, especially as the country transitions from low to middle-income status
and seeks to diversify its investor base.