Jump in public debt to 47.5% of GDP manageable, Kittiratt insists

The government and state enterprises plan to borrow Bt959.39 billion in new funds for the 2013 fiscal year, which started this month. The Cabinet yesterday approved new borrowing that will add to the current public debt of Bt4.89 trillion as of the end of July.

The new debts will increase public debt to 47.5 per cent of gross domestic product from the current 44.19 per cent.

"It’s a high amount but it is still below the sustainable level of public debt, set at 60 per cent of GDP. We are committed to fiscal discipline," Kittiratt said.

The government will borrow Bt717.74 billion while state enterprises will raise a combined Bt241.65 billion, he said.

The finance minister said the government needed to borrow Bt300 billion to cover the budget deficit. Another Bt340 billion is also needed to finance flood-prevention projects, and Bt49.5 billion to finance the government-sponsored natural-disaster insurance fund.

The government plans to borrow Bt28.24 billion and re-lend it to the State Railway of Thailand and Mass Rapid Transit Authority to finance public-transport projects in Bangkok (Red and Blue lines) and double-tracking between Chachoengsao and Kaeng Khoi district, Saraburi.

The government will not borrow foreign funds, but state enterprises plan to secure foreign loans equivalent to Bt15.46 billion, he said.

"We will use local funds, and this will also help the central bank mop up liquidity from the market," he said. He was referring to a monetary operation whereby the central bank from time to time intervenes in the foreign-exchange market by selling baht and buying US dollars, aiming to keep the baht weaker.

Asked about possible burdens of the rice-pledging scheme, Kittiratt said the government planned to borrow or guarantee state-enterprise loans worth Bt150 billion to support the project.

"The Commerce Ministry has promised cash flows from reselling the government rice stock," he said, responding to criticisms of runaway agricultural-subsidy costs.

A new source of government revenue will be the upcoming bandwidth auction for third-generation mobile broadband, he said.

The government may also pay yen-denominated debt ahead of schedule as it anticipates a stronger yen, said Kittiratt, who is also a deputy prime minister.

The new borrowing does not include a plan for a logistics-network linkage with Asean countries over the next seven years worth about Bt2 trillion. The government plans to submit to Parliament next year an investment bill worth that amount to finance that scheme, which will cover roads, railways, ports, airports, and customs checkpoints at borders, he said.

"The investment cost would be about Bt300 billion a year, which is not much while GDP expands," Kittiratt said.

He also pledged that the government would keep the debt-service ratio at a level not exceeding 15 per cent of annual expenditure.

The government has started drafting a plan for capital spending for the 2014 fiscal year to speed up public investment, which usually faces a delay in budget disbursement, he said.

Somchai Jitsuchon, a research director at the Thailand Development Research Institute, voiced his concern about fiscal discipline, particularly leakage due to corruption.