Expanding mid-year budget by 122-bn may shake Thai economy: BOT
Allocating additional funds to 2024 budget may affect country’s financial stability, warn central bank and national economic council
The bill allocating an additional 122 billion baht to the fiscal 2024 budget for financing the digital wallet scheme could affect Thailand’s financial stability, the central bank and top economic institution warn.
The warning came after the Budget Bureau provided more details of the mid-year budget bill to the Cabinet on Tuesday.
The completed bill will be sent to the Cabinet for a final okay on July 2, after which it will be tabled at the House of Representatives.
If the bill passes, then the 500-billion-baht digital wallet scheme will be financed by 122 billion baht taken from the fiscal 2024 budget and the rest from the fiscal 2025 budget as well as profits from the Bank for Agriculture and Agricultural Cooperatives.
A source at Government House quoted the Bank of Thailand (BOT)’s letter to the Cabinet, which said the BOT was not opposed to the additional budget allocation.
The central bank expressed worries that the allocation will trigger a budget deficit and have an impact on financial stability.
“The Cabinet should be ready for the financial risks this decision will spark, like an increase in government debt and interest burden, which could affect investors’ confidence as well as costs of fundraising,” said Alisara Mahasandana, BOT deputy governor of monetary stability.
Instead, she said, the Cabinet should focus on reforming and boosting the efficiency of revenue collection as well as focus on tax measures that can mitigate losses in government earnings.
Echoing BOT, the National Economic and Social Development Council (NESDC) said the additional budget will trigger a surge in government debt and a drop in financial earnings between fiscal years 2024 and 2025. This, in turn, will have an impact on investors and credit rating agencies’ confidence.
Instead, the NESDC said, the Cabinet should accelerate budget allocation to the Thai economy in the fiscal years of 2024 and 2025.
It also asked relevant agencies to pay attention to boosting financial efficiency by reducing budget deficit, setting guidelines on improving the efficiency of government revenue collection and allocating funds to repay the government’s debt per fiscal year.
“This will help expand financial space to cope with risks from economic volatility, maintain investors and credit rating agencies’ confidence and mitigate the impact on financial sustainability,” NESDC said.
