Budget constraints could hamper spending by new govt

According to Section 28 of the Financial Discipline and Treasury Management Act, the remaining funds available amount to 1.8 trillion baht, while the central budget for fiscal year 2023 has only 30 billion baht left, and for fiscal 2024, a ceiling of 93 billion baht has been set.

According to the Finance Ministry, the government's spending capability, both within the framework of Section 28 of the Financial Discipline and Treasury Management Act and the public debt ceiling, is quite restricted. In terms of spending under Section 28 of the Act, the government is close to reaching the 32% ceiling of the budgeted expenditure. Consequently, there are limitations on any government actions involving spending under Section 28.

At the end of fiscal 2022, the government's outstanding commitments for spending under Section 28 were around 1 trillion baht, accounting for 33.5% of the budgeted expenditure. By the end of June 2023, the remaining funds available under Section 28 amounted to about 18 billion baht, which may not be sufficient to support any government activities in the 2023 fiscal year.

In addition, in the 2024 fiscal year, consideration might be given to reducing the outstanding commitment rate from 32% to 30% of the annual budgeted expenditure.

Implementing projects under Section 28 could have an impact on the treasury in the future and impose burdens on government agencies, especially state financial institutions. These agencies would have to reserve funds to cover their own expenses in advance. The government should therefore implement projects under Section 28 only when necessary and prioritise projects that are carried out annually and have long-term plans, including incorporating them into the budgeted expenditure.

Government policies designed to win popularity or stimulate the grassroots economy have often utilised state banks as a tool to advance payments. For example, income guarantee projects and various agricultural produce pawn schemes, which fall under non-budget or quasi-budget spending according to Section 28 of the Financial Discipline and Treasury Management Act. In the future, the government will have to reimburse these expenses to state banks.

Regarding the government's treasury status, for fiscal 2023 the Cabinet has approved a budgeted expenditure ceiling of 3.35 trillion baht, estimated government revenues at 2.75 trillion baht, and a budget deficit ceiling of 593 billion baht, or 3% of gross domestic product (GDP).

Under the law, the maximum borrowing framework for offsetting budget deficits is 20% of the budgeted expenditure plus 80% of the principal loan repayment. For the 2024 fiscal year, this stands at 763 billion baht. Therefore, there remains a borrowing space for offsetting deficits of 170 billion baht. However, if there is an increase in borrowing to offset deficits, it will exceed 3% of GDP as set in the medium-term fiscal plan for the 2024-2027 fiscal years.

According to news sources, the most readily available source of funds that the government can use for popular policies is the central budget. In the 2023 fiscal year, the available funds amounted to 92 billion baht, and about 30 billion baht still remains. For the 2024 fiscal year, the available funds amount to approximately 93 billion baht.

Under the law, the maximum borrowing framework for offsetting budget deficits is 20% of the budgeted expenditure plus 80% of the principal loan repayment. For the 2024 fiscal year, this stands at 763 billion baht.

Nonetheless, expenditures must comply with the Financial Discipline and Treasury Management Act, which requires spending on objectives related to disaster prevention, relief, mitigation, public safety, and urgent state missions. If the central budget is insufficient, the government can draw funds from the reserve payment fund, which has a capacity of 50 billion baht.