Thailand may raise debt ceiling to 75% and issue emergency borrowing decree to fund crisis measures

Government House sources say the Prime Minister has ordered a major overhaul of Thailand’s 2026 budget plan to build fiscal “ammunition” against the escalating Middle East conflict, which the government views as a compounded crisis affecting both energy and public finances.

The planned response is expected to include a “Thai Helps Thai Plus” programme aimed at restructuring the economy, supporting living costs, subsidising energy prices, and continuing schemes such as Kon La Krueng Plus and the State Welfare Card to protect vulnerable groups.

However, officials say the government faces tight constraints. The central contingency budget is estimated at just 25 billion baht, while remaining borrowing headroom is put at a little over 700 billion baht, widely seen as insufficient given the size of potential commitments, including an Oil Fuel Fund guarantee estimated at 150 billion baht, plus additional urgent spending packages.

As a first step, the Prime Minister has instructed agencies to draft a 2026 budget transfer bill, pulling funds back into the central budget from projects that have not yet been disbursed or are unable to commit spending in time. Sources expect this could free up tens of billions of baht.

In parallel, the government is looking to deploy 50 billion baht from the contingency reserve under the Budget Procedures Act B.E. 2561 (2018) to help stabilise the situation.

If those measures still fall short, the government is considering a royal decree authorising emergency borrowing, similar to the approach used during Covid-19. The scale under discussion is described as hundreds of billions of baht, lower than the one-trillion-baht level seen in past emergency borrowing.

To ease borrowing constraints, the government is also considering raising the public debt ceiling. As of February 2026, public debt stood at 12.59 trillion baht, or about 66% of GDP, nearing the current 70% cap. A move to 75% would potentially create room for almost 1 trillion baht in additional borrowing, according to the assessment cited by sources.

The direction aligns with remarks by Deputy Prime Minister and Finance Minister Ekniti Nitithanprapas, who has said the Finance Ministry is considering adjusting the debt ceiling, arguing Thailand’s public debt ratio remains lower than many countries. Sources add that Ekniti has also raised the issue informally with credit rating agencies while attending World Bank meetings, to explain the need for preparedness amid global shocks.

Officials stressed that any debt-ceiling increase would require clear public explanation of how funds would be used, alongside strict adherence to fiscal discipline.

Thailand braces for stagflation risk as living costs bite

As the Middle East situation pushes up energy prices and the cost of living, Thai consumers are becoming more value-conscious in their spending, shaping purchasing decisions and sending an important signal for economic agencies to track.

Signs of softer purchasing power align with the March 2026 consumer confidence index, compiled by the Centre for Economic and Business Forecasting at the University of the Thai Chamber of Commerce, which was reported as the lowest level in six months. The decline was attributed to consumer concerns about the war involving the United States, Israel and Iran, and the resulting rise in oil prices, pressures that are weighing on Thailand’s economy and household costs, while signalling persistent anxiety about the economic outlook.

At the same time, the government has been working to support those affected by the Middle East conflict, rolling out measures aimed at easing living-cost burdens for vulnerable groups, the transport sector, and farmers. The objective is to cushion impacts and limit economic risks from a scenario that could bring slower growth alongside higher inflation. The government expects these measures to reduce burdens and lower costs for operators and farmers, helping to limit the pass-through of higher costs to consumers.

Deputy Prime Minister and Finance Minister Ekniti Nitithanprapas acknowledged that the crisis is likely to reshape the global economy in multiple ways, especially in energy, warning that the era of cheap oil may not return for at least one to two years, as the war has caused significant damage to energy infrastructure in the Middle East. He expressed serious concern about the risk of stagflation, where high inflation coincides with a weakening economy worldwide, saying the government must prevent the situation from escalating into a repeat of the 1997 economic crisis.

With risks at crisis level, the government needs the tightest possible planning to mitigate immediate shocks from soaring oil prices and the threat of high inflation alongside weak growth. At the same time, longer-term economic restructuring remains just as critical, to help Thailand move beyond persistent below-potential growth and address structural weaknesses that no longer match the direction of the global economy.