Despite public debt approaching its limit of sustainability, Thailand’s Ministry of Finance denies that the country is on the brink of bankruptcy and will take a further 48 billion baht ($1.5 billion) loan from Manila-based Japanese-led multilateral lender Asian Development Bank (ADB) late this month.
Local media are speculating that the government is facing financial collapse following a Cabinet-approved Public Debt Management Office (PDMO) plan to borrow an additional 214 billion baht to finance a potentially larger budget deficit than expected.
PDMO director-general Patricia Mongkhonvanit on Thursday said the government has adequate treasury reserves but admitted it needs to borrow more in case revenue falls further than estimated.
The national budget passed for fiscal year 2020 totals 3.2 trillion baht. To plug the gap left by a projected shortfall in revenue, the government originally planned to borrow 469 billion baht. However, the budget bill allows the government to borrow as much as 680 billion baht to cover the deficit, meaning another 214 billion baht can be borrowed, Patricia noted.
If the government borrows the full 680 billion baht, public debt will rise to 52.4 per cent of gross domestic product (GDP), up from the current 45.83 per cent, she said.
Public debt is expected to rise further to 57.8 per cent of GDP in the 2021 fiscal year (October 2020 to September 2021). The ministry has set the sustainable public debt limit at 60 per cent of GDP.
She said: “It is too early to say whether we’ll need to raise the limit beyond 60 per cent of GDP because [sustainability of] debt levels depend on changing economic conditions.”
By global standards, Thailand’s public debt is still relatively manageable, given debt in some countries is above 100 per cent of GDP.
Economists have been urging the Thai government to spend more to boost the economy and help workers and small businesses suffering the impact of Covid-19.
However, Thai public debt is under strong pressure from the sharp economic contraction and high cost of dealing with coronavirus fallout.
Patricia said the government also plans to borrow one trillion baht under the Covid-19 recovery emergency decree.
Part of that total is $1.5 billion (48 billion baht) from the ADB, the contract for which will be signed by the ministry late this month or early next month, she said.
THE NATION (THAILAND)/ASIA NEWS NETWORK