Government told it would be illegal for GSB to lend for digital handout scheme

The answer from the government’s legal advisory agency came in response to questions from the government subcommittee tasked with working out details of the scheme, according to a Government House source familiar with the matter.

The Council of State said that the Government Savings Bank Act, which regulates the state-owned bank’s operations, lists eight areas of banking business that the GSB can be involved in and lending to the government is not one of them.

“The Council of State views that this cannot be done as it is against the law and not in line with the bank’s objectives,” the source said on Thursday.

The scheme, aimed at stimulating the country’s economy, calls for 10,000 baht in digital money to be distributed to all Thais aged 16 and above for them to spend at shops within a 4-kilometre radius of their registered address within a six-month period.

An estimated 560 billion baht in state funding is required for the handout project.

The subcommittee, chaired by Deputy Finance Minister Julapun Amornvivat, had asked the council whether the scheme could be implemented under three relevant laws – State Fiscal and Financial Disciplines Act, Currency Act, and Government Savings Bank Act.

The council’s answer was that the handout scheme is not against the State Fiscal and Financial Disciplines Act, according to the source.

Regarding the Currency Act, the scheme can be implemented as long as all the digital money involved is converted into fiat money within the programme’s six-month period. If the digital money continues to circulate in the system after that period, the scheme will be considered illegal as this digital money would become a new currency in Thailand.

The law empowers only the Bank of Thailand to issue the Thai baht and prohibits the issuance of any token to represent the currency without permission from the finance minister.

The source said on Thursday that members of Julapun’s subcommittee voiced concerns that the six-month time limit for the digital money to be spent would be inadequate to stimulate the economy to the extent expected by the government.

Prime Minister Srettha Thavisin said earlier that the handout scheme would contribute to a 5% economic growth next year, with increased consumption expenditure and higher tax revenue.

According to the source, the subcommittee was unable to come up with measures to prevent possible irregularities involving the handout scheme. They would let that concern to be considered by the government’s policymakers, the source said.

Julapun told his panel members that with no clear answers regarding the source of funding or the mobile application to be used, the start of the handout would be postponed further, according to the source.

Julapun said on Wednesday that the digital wallet handout was now expected to start in April or May next year, in line with the period in which the Fiscal 2024 Act comes into effect.

He said that several details were discussed and would be presented to the Finance Ministry meeting next week, to be chaired by PM Srettha, who also doubles as the finance minister.