(Bloomberg) -- Thailand approved a debt moratorium plan that will benefit millions of farmers struggling to pay back about 283 billion baht ($8 billion) of loans as Prime Minister Srettha Thavisin rolled out more measures to spur economic growth.

Srettha’s cabinet on Tuesday gave the nod to set aside 12 billion baht from the state budget this year to cover the interest cost on loans taken by an estimated 2.7 million farmers eligible for the debt suspension. The three-year moratorium, effective from Oct. 1, will likely cost the government about 30 billion baht, Deputy Finance Minister Julapun Amornvivat told a briefing.

The debt relief for farmers, a key support base for Srettha’s Pheu Thai Party, is part of a series of stimulus policies unveiled by the new government to lift economic growth to an average 5% annually. While the past governments spent a significant amount of money in alleviating farmer debt burden, it has failed to stem a surge in household debt level to 90% of gross domestic product.

“This time will be different,” said Julapun, adding that the government will not only suspend interest and principal on loans taken by farmers but also provide trainings, fresh loans and other incentives to lower bad debts. 

More than 90% of Thai farmer households are indebted at an average of 450,000 baht, and the vicious cycle of debt and reliance on credit to overcome the burden pushes them into a trap, according to a study by the Puey Ungphakorn Institute of Economic Research.

The cabinet also approved setting up of a committee to work out details of the debt relief program and a one-year debt freeze for small- and medium-sized businesses affected by the pandemic, according to government spokesman Chai Wacharonke.

Other measures approved by the cabinet include: 

  • Operational budget of 1.38 trillion baht and 259 billion baht investment for 46 state enterprises for the fiscal year starting Oct. 1
  • Approved 2.2 trillion baht public debt management plan for the 2024 fiscal year, which include new borrowing of 194.4 billion baht, debt restructuring and debt repayment
  • The National Housing Authority, Dhanarak Asset Development Co., the State Railway of Thailand and the Bangkok Mass Transit Authority to borrow funds next fiscal year to manage their businesses

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