Thailand: Govt to raise debt ceiling

  • The State Monetary and Fiscal Policy Committee chaired by Prime Minister Prayut Chan-o-cha on 20 Sep 21 decided to raise the ceiling of the public debt-to-GDP ratio from 60% to 70% which will allow further borrowing to rehabilitate the economy battered by Covid-19.
  • Finance Minister Arkhom Termpittayapaisith said that the decision was intended to provide the government with more fiscal space should the need arise for the government to borrow more money to carry out medium-term financial policies. Mr Arkhom assured that the government still has the ability to repay debts.
  • The Bank of Thailand (BoT) previously urged the government to borrow an additional THB1tn to address the severe economic impact of the pandemic and boost the country’s long-term growth prospects.
  • Given that the economic impact of the pandemic is expected to be harder and longer than the BoT’s earlier assessments, fiscal policy should play a key role in ameliorating lockdown pain and supporting the economy, the central bank’s governor, Sethaput Suthiwartnarueput, said.
  • Lower household incomes and higher unemployment caused by the pandemic are the key affected areas that need fiscal measures. During 2020-2022, household income is expected to decrease by THB2.6tn, of which 2020-2021 will see a THB1.8tn loss, and another THB800bn hit in 2022.
  • As a result, the BoT sees it as reasonable for the government to borrow an additional THB1tn, which will account for 7% of the country’s gross domestic product (GDP), he said. Such a move would increase the country’s public debt ratio to 70% of GDP by 2024.
  • A Finance ministry source said the committee’s meeting agreed that fiscal space under the THB500bn loan decree is now very limited.
  • “If the ceiling had not been raised to 70%, investment projects carried out by state agencies and state enterprises that are awaiting loans to implement them would have been impeded,” the source said, adding that the revised ceiling is intended for medium-term fiscal policies so there is no need to borrow up to THB1tn straight away because the THB500bn loan decree is still adequate for short-term policies to improve the economy.

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