Arkhom rebuts criticism by ex-BOT governors, justifies government policies

Arkhom was responding to six former central bank governors, who had expressed concern during a recent seminar that excessive spending by the government would expose the country’s financial status to risk. They had also criticised the government for using deficit budget for several consecutive years.

Arkhom defended the government, saying the current spending in comparison with revenue could not be considered excessive, arguing that the deficit ratio in the national budget had actually dropped for fiscal 2023.

“Anyway, a deficit in the budget is still necessary but we have reduced the ratio,” Arkhom said.

He said the Finance Ministry had to make sure that the policies would facilitate economic recovery.

“In the past, the central bank used to increase the policy interest rate once it saw signs of economic recovery but I have to thank the current central bank governor for understanding the situation [and not increasing the policy rate],” Arkhom said.

“The Covid-19 situation is not over yet. This shows that the fiscal policies are in line with the policies of the Finance Ministry.”

The minister said the government had to borrow to tackle the Covid-19 crisis during the past two years and the practice was similar to what was done during the financial crises in 1997 and 2009.

“Every crisis needs money, so the government has to take recourse to a deficit budget and this policy is used in every country,” Arkhom said.

The minister said the government had raised the public debt ceiling, as had been done in the past, but the ceiling would be lowered once the economy recovers.

The finance minister accused previous governments of failing to restructure the country’s tax base after they introduced policies to reduce tax rates, such as corporate tax rates, leaving the present government with inadequate revenue. He said the current government is trying to restructure and expand the tax base.

“In the past, we didn’t do this but the government’s expenditure has been rising from investments, such as investments for roads to connect to rural areas, to allow rural people to bring their products to markets.

“And fixed expenditure is also rising, especially spending for various welfare schemes. Now, we have to take care of the elderly as well, so we have to restructure the tax structure,” Arkhom added.

The minister dismissed concerns that Thailand would face stagflation, a scenario in which the country’s inflation rises while the GDP declines.

He said the country’s GDP is rising but the cost is rising as well. “So, the economy is expanding quantitively and it’s not a concern. We only have concern about inflation because the rising cost would slow down spending by consumers. So, we must be able to control the inflation,” Arkhom said.

He said the government would not launch the THB1,500 cash subsidy co-payment scheme again because the economy has started to revive and the people are regaining their purchasing power. Instead, the government would provide purchase subsidies to only vulnerable groups, such as the registered poor who hold state welfare cards.

Speaking at the same press conference, Krisada Chinavicharana, permanent secretary for Finance, said the country has been using a deficit budget for most of the past 40 years.

He said Thai governments had been successful in making a balanced budget for only two years in the past 40 years.

He explained that Thailand is a developing country that needed to invest in infrastructure, so it needed to use a deficit budget.

He said the government could still manage the public debt because the current ratio of public debt is 60.17 per cent to GDP, well below the 70 per cent ceiling.

He said the treasury reserve now stands at about THB580 billion and the government is expected to receive revenue of THB2.4 trillion at the end of the fiscal year and treasury reserves would remain at about THB500 billion.