An official on Wednesday released details of the plan which halves debts for many farmers and echoes a signature policy of twice-elected and now fugitive former prime minister Thaksin Shinawatra, who remains highly popular among the protesters.
The announcement did nothing to halt plans by the red-shirted protesters for another big rally in Bangkok on Saturday to demand Prime Minister Abhisit Vejjajiva call elections within 15 days, a poll analysts say the government would almost certainly lose.
But it marks the start of an apparent concerted effort by Abhisit to court the rural poor, said Somjai Phagaphasvivat, a professor of politics and economics at Thammasat University.
"Thaksin was hugely popular because of these policies. Now Abhisit is using Thaksin's policies against him, to try to take away his support," he said.
"By reaching out to the poor, he's offering something to the electorate, to increase his popularity and tap into Thaksin's support, bit by bit, over time." The protesters and Abhisit failed to reach agreement in two rounds of televised talks this week. Protest leaders rejected a concession offered by Abhisit on Monday to call elections by the end of the year, about 12 months ahead of deadline.
Jatuporn Prompan, a "red shirt" leader, said protesters were not interested in further talks and would look at new ways to push for elections, vowing to keep up pressure on the government before a Thai holiday period from April 13 to 16.
"We have a different standpoint, so it doesn't work out," Jatuporn told reporters.
Despite the political turbulence, foreign investors continue to embrace Thailand, seizing on opportunity to invest in one of Asia's cheapest and now fastest-rebounding markets, confident Abhisit will prevail in the showdown with the "red shirts.”
Foreign investors have snapped up $1.2 billion in Thai stocks since Feb. 22, according to stock exchange data, helping to drive the benchmark stock index up 8.3 percent this year, making it Southeast Asia's second-best performer after Indonesia.
The protesters say the British-born, Oxford-educated Abhisit came to power illegitimately, heading a coalition the military cobbled together after courts dissolved a pro-Thaksin party that led the previous coalition government.
It is unclear if the farm debt plan will help Abhisit make political inroads into the vote-rich north and northeast provinces, home to just over half of Thailand's 67 million people and aggressively courted by Thaksin.
While he has the firm backing of the military and elite establishment, Abhisit has struggled to win over farmers, whose votes can decide elections in a country that is the world's biggest rice exporter and second-biggest sugar exporter.
Under the scheme, debts owed by farmers will be halved.
They will also get 15 years to pay off the remaining 50 percent of their original debt, said Vichit Chantachaeng, an acting director of the state Farmers' Reconstuction and Development Fund.
The plan affects about 510,000 debtors who owed a total of about 80 billion baht ($2.5 billion) in non-performing loans.
"We are sure that the plan could help support farmers to have better lives," Vichit told Reuters, adding that the plan would be submitted for cabinet approval next week.
Some criticized the scheme as a form of subsidy that would inflict long-term damage by rewarding poor management and preventing farmers from becoming more efficient and competitive.
"It would turn Thailand into a big social welfare state which spends a lot of money in helping the poor, but fails to develop their people," said Sompob Manarungsan, an economist at Chulalongkorn University.
Thaksin, ousted in a 2006 coup and later convicted in absentia of graft, lives in self-imposed exile.
Widely accused of being corrupt and authoriatarian, he still remains popular as the first civilian leader to reach out to the poor. His policies included debt relief for farmers, suspending debts for two years and allowing resumption of payments in the third year.
