Seven-year plan likely to keep public debt below 50% of GDP, PDMO says
Based on the government's seven-year borrowing plan, the level of public debt is estimated to stay at no more than 50 per cent of gross domestic product, lower than the 60-per-cent ceiling, said the Public Debt Management Office.
The 2013-2019 plan is based on annual GDP growth of 4.5-5 per cent. The budget deficit is targeted to narrow by 25 per cent per year on expectation of a balanced budget in 2017. The maximum level of public debt is estimated at 49.9 per cent of GDP.
"Although Thailand set its [public debt] ceiling at 60 per cent of GDP, we will try to control it at no more than 50 per cent of GDP. At the end of November, public debts stood at Bt4.8 trillion or 43.27 per cent of GDP," PDMO director-general Chularat Suteethorn said.
She said the estimate included borrowings for the emergency decree on water management worth Bt350 billion and infrastructure investment worth Bt2 trillion. It also includes populist projects such as price-pledging schemes for rice and other agricultural products.
For the emergency decree on water management, about Bt10 billion has been disbursed and the remaining Bt340 billion will likely be spent fully within this fiscal year. For this, the PDMO may raise some funds through foreign-currency-denominated bonds worth no more than US$2 billion (Bt61 billion). The office is studying the market and interest rates.
On the infrastructure investment, the PDMO expects to see the disbursement during the 2013 fiscal year, but it could be postponed to fiscal 2014 as the legislation pertaining to it has not been formally announced yet.
"Investment in infrastructure projects will focus mainly on logistics and transport systems, particularly the rail system, as Thailand’s transport depends mainly on [road] vehicles, which consume large amounts of fuel, and costs about Bt150 billion per year. If the transport system is shifted towards rail, such costs will be lessened tremendously," Chularat said.
On the pledging scheme for rice and other agricultural products, the government plans for outstanding debts of no more than Bt420 billion. The current debt stays at Bt260 billion in the 2011-12 fiscal year. Recently, the Cabinet approved additional borrowings of Bt150 billion for the 2012-13 fiscal year and these could be made in January and February. The initial amount is about Bt370 billion.
Chularat said that although the public-debt estimate is based on annual GDP growth of 4.5-5 per cent, if the economy grows less than expected the government would re-prioritise projects to keep the debt level at no more than 50 per cent of GDP.
"We focus mainly on 50 per cent. If the debt level comes closer to that point, we will manage it with such measures as debt restructuring or postponement of unnecessary projects," she said. "If GDP grows less than expected, unnecessary projects will be cut. We will have a contingency of about 10 per cent in case of unexpected events."
PDMO deputy director-general Suwit Rojanavanich said the Laotian government recently expressed its intention to raise funds through baht-denominated bonds worth Bt1.5 billion. The interest rate will be about 4 per cent. The proceeds will finance a dam.
The proposal is under consideration of Thailand’s Ministry of Finance, the Bank of Thailand and the Securities and Exchange Commission.
