Constitution court to rule on decrees' validity on Feb 22

Former finance minister Korn Chatikavanij, who opposes the two decrees, told the judges that no discussion had been made with other agencies for issuing the executive decree on the debt transfer, and that could destabilise the economy.

The level public debt is relatively low at 41 per cent of gross domestic product and the government could borrow Bt2 trillion more before it would hit the debt ceiling of 60 per cent – a prudent fiscal requirement.

"The government cited the urgency for issuing the executive decrees to the public debt service burden of 12 per cent of the annual budget. However, the actual figure is 9.33 per cent, compared with the threshold of 15 per cent. This means [the government] could borrow more without issuing the emergency decree," Korn said.

There is also no urgency in borrowing Bt350 billion, as the government has not made these water-management projects clear in terms of detailed schedules and plans, he added.

Senator Kamnoon Sidhisamarn said issuing the executive decree for the debt-management transfer did not conform to Article 184(2) of the Constitution, which mandates unavoidable necessity. The government has a Bt120-billion central budget, Bt66-billion emergency fund and other sources of funds to proceed with the country’s restoration and water management.

However, Deputy Prime Minister Kittiratt Na-Ranong stressed the urgent need of funds for the government’s post-flood investment.

Kittiratt, also the finance minister, told reporters after testifying on behalf of the decrees that he had expressed his full confidence to the court in the Cabinet’s decision-making process. The Cabinet resolved that there was sufficient urgency to issue four executive decrees, including the two in question.

Kittiratt also told the court that to preserve fiscal discipline, the fiscal deficit for 2013 would be lower than in 2012. Still, adding the funds raised under the four executive decrees, the government would have more than Bt1 trillion worth of debts for post-flood investment.

The World Bank in November said it expected Thailand to require Bt756 billion to build a stronger and more resilient economy over 24 months.

Citing urgency, the government of Prime Minister Yingluck Shinawatra opted to issue four executive decrees, rather than sponsor normal legislation, which is subject to parliamentary screening.

Democrat MPs and some senators sought a court ruling on whether the government’s plans involving the Bt350 billion borrowing and the management of the Financial Institutions Development Fund’s Bt1.14-trillion debt were really urgent.

With public debt of Bt4.22 trillion, the ratio is getting close to the upper limit of 60 per cent of GDP, Kittiratt said. If there had been no management of the debt and there had existed borrowing needs, public debt would have reached 50 per cent of GDP.

Of total public debt, Bt1.14 trillion belongs to the FIDF.

"The debt, which belongs to the country, will not be forced on any agency to take responsibility alone. The Deposit Protection Act also opens an opportunity to collect fees from banks at a rate of no more than 1 per cent," he said.

Meetings have been held among the Finance Ministry, Bank of Thailand and commercial banks on raising bank fees, he said. Banks, including state-run banks, are asked to pay the equivalent of 0.47 per cent of their total deposits to help raise funds to pay the debt’s interest burden.

Kittiratt said the FIDF debt would still be counted as public debt but the planned debt-management transfer would allow the government to save its budget for interest expense.

The FIDF debt must be urgently transferred to the Bank of Thailand, or the government would need to set aside Bt60 billion for interest payments in the 2013 fiscal year. Persistently high deficits would then erode confidence, he said.

"If the process were unacceptable to society and the world, the stock market would have plunged. That did not happen, reflecting that the government’s process is on the right track. Still, this is up to the court’s judgement."

Kittiratt declined to comment on what the government would do if the court finds that there is no rush to issue the two executive decrees.