Finance upbeat on debt management
The Finance Ministry yesterday expressed confidence that it could manage public debt without any difficulty, while experts warned the government about its borrowings and a rising level of debt that could spark a crisis similar to that experienced in the E
Speaking at a seminar on “Public Debt: A Time Bomb or Economic Stimulus?”, Chakkrit Parapuntakul, the ministry’s deputy permanent secretary, said Thailand currently had a public debt level of about 47 per cent of gross domestic product, well below the 60-per-cent ceiling.
There are also annual ceilings for government borrowings at 20 per cent of the annual budget, for external borrowings at 10 per cent, and guarantees for state enterprises at 20 per cent, he said.
“The assessment is that Thailand’s public debt could reach 50 per cent of GDP, before declining. This assumption does not include the rice-pledging scheme. If the scheme suffered a loss of Bt100 billion, that is about 1 per cent of GDP. If the programme continued for two years, the public debt level would rise by only 1-2 per cent. It’s not a concern. Based on the past average, the economy grows at about 5 per cent per year,” he said.
Somchai Jitsuchon, research director of the Thailand Development Research Institute, told the seminar that while the current level of public debt might not trigger a problem, its constituent parts should be examined.
The level of public debt is expected to rise in all scenarios, he said. In the normal case, with 5-per-cent economic growth and 2.5-per-cent inflation, public debt could touch 60 per cent of GDP before going down.
“The point of concern is the continuity of populist policies and the economy growing at a lower rate than expected,” Somchai said.
The important question is whether the borrowings are being made for efficient purposes, he said, adding that in the rice-pledging scheme, it had been found that about 80 per cent of the funding went to the rich in urban and rural areas.
Nitinai Sirismatthakarn, director of the Thailand Future Foundation, said the actual figure for public debt might not be as important as its direction and growth rate.
To decide whether public debt will be a stimulus or a bomb, “we need to examine its elements and purposes. If the public debt is for investment, it will be good debt. However, if it is intended for consumption, that will not bring about more production and could be a bomb. The situation is similar for populist projects.”
