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Falling treasury reserves: There’s more to it than the govt’s claims

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A debate has been raging since last week as to whether the government is “broke” after the Finance Ministry disclosed that the country’s treasury reserves have fallen to Bt74.9 billion.

The government has strongly dismissed the perception that it is in a financially troubled situation, explaining that it was revamping the country’s budgetary system. It assured people that the existing reserves were appropriate, as the country did not need to borrow, which in turn would lead to an interest burden. The reserves have been spent stimulating the economy and, more importantly, for implementing national reforms, the government said.
What actually are the treasury reserves? According to the Treasury Reserve Act of 1948, it refers to all money earned by the government through taxes, fees, fines, loans and other forms of revenue. The Kasikorn Thai Research Centre defines it as “cash or its substitutes available for government use for implementing state work”. This refers to revenue that is a surplus from the money allocated for government spending at a certain period of time.
Banyong Pongpanit, a banker who once worked for a “Super Board” set up by the post-coup government, likened the treasury reserves to current accounts, which for him “mainly involves cash management and does not reveal much about the government’s financial status”.
During the country’s crippling financial crisis in 1997, some experts said the treasury reserves were like the change you have in your pocket. “The more a country has it, the more credibility that country gains,” the experts concluded. This is comparable to when we have money left in our pocket. We are regarded as credible when we want to borrow, as our creditor is assured that we can repay the debt. But if we do not have money left in our pocket, we will have less credibility, as people are unsure if we can pay back in the future.
This is also the case for treasury reserves, which are money that is to be used in times of emergency.
Looking back at recent fiscal years, we find that this year’s treasury reserves in the first quarter (October to December) are worryingly low. In the first quarter of fiscal year 2016, the treasury reserves stood at Bt386.4 billion, compared to Bt179.3 billion in 2015, Bt324.7 billion in 2014, Bt259.1 billion in 2013, Bt264.6 billion in 2012 and Bt313.4 billion in 2011.
There is nothing wrong with spending money in the treasury reserves. Money is saved for the purpose of being spent. However, there must be sufficient reasons and good causes for the spending. The government explained that the money was spent with the goal of stimulating the economy by encouraging public spending and investment.
The question is whether the goal has been achieved. If the economy is really stimulated, the money spent by the government must have been returned in the form of taxes and other revenues to the state. If that is the case, the treasury reserve will increase as a result. However, if the reserve was spent on something that is not beneficial to the country or fails to achieve the goal of stimulating the economy, the outcome will be opposite to what is desired. More and more money from the reserve will be drawn and it will be depleted some day. 
The disappointing investments from local and foreign businesses are indicative of the government spending. 
The reserve must be spent on appropriate projects in order to avoid wasting the taxpayer’s money.
This issue may not seem relevant to many people as these people are too busy making ends meet in the face of a weak economy. Their main goal is to survive the hardship they experience on a daily basis. And the hope of getting help from the government seems to be diminishing more and more.

Published : February 08, 2017

By : Attayuth Bootsripoom [email protected]