Thai Public Debt Poses Threat to Credit Rating, Warns TDRI
Government urged to cut wasteful spending and focus on long-term structural reforms to avoid a downgrade that would increase borrowing costs for all
- The Thailand Development Research Institute (TDRI) has warned the new government that the country's rising public debt is risking a credit rating downgrade.
- A downgrade would increase borrowing costs for both the government and the private sector, which would further add to the national debt.
- The TDRI recommends the government review its spending, cut programs with low economic returns, and focus on long-term structural reforms like liberalizing regulations.
The Thailand Development Research Institute (TDRI) has warned the new government that the country's rising public debt risks a credit rating downgrade.
Such a move would increase the cost of borrowing for both the government and the private sector, further adding to the nation's debt burden.
According to TDRI President Dr Somkiat Tangkitvanich, the government must review its revenue and expenditure to achieve a better balance.
He stated that Thailand's public debt has been on a continuous upward trend for several years, raising the risk of a downgrade.
This would force the government to pay higher interest on future bonds, a cost that would be mirrored in the private sector on any new debt instruments.
Dr Somkiat urged the government to identify and cut spending on programmes that offer low economic returns.
He also expressed confidence in the new Finance Minister, Dr Ekniti Nitithanprapas, to create a clear revenue-generation plan.
Given his past experience as Director-General of both the Revenue and Excise Departments, his leadership could reassure investors and credit rating agencies that Thailand will not allow its public debt to reach unsustainable levels.
In addition to short-term stimulus measures, the TDRI recommends the government focus on long-term structural economic problems.
While these may not produce immediate results, they are crucial for national development and would ultimately bring credit to the government as a long-term reformer.
One immediate and effective reform that does not require a large budget is the liberalisation of regulations.
The TDRI’s research has shown that freeing up the electricity market, for instance, could have a massive economic multiplier effect and help address long-term structural issues.
