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Thailand’s Government to Borrow Billions for Economic Recovery

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Thailand's Government to Borrow Billions to Fund Covid-19 Recovery

Thailand Government will borrow $46 billion next year as the country expands its fiscal stimulus measures to counter the economic impact from the covid-19 pandemic amid dwindling state revenue.

A cabinet meeting chaired by Prime Minister Prayuth Chan-Ocha on Tuesday approved borrowing of ($US46 billion) 1.47 trillion baht in the fiscal year starting Oct. 1, according to a government statement Tuesday. The fund-raising is seen down 11% from a revised ($US52Billion) 1.66 trillion baht this year, official data show.

The borrowing will be used to finance various economic stimulus programs, budget deficit, infrastructure investments and bailout of some pandemic-hit state enterprises, the government said. The public debt-to-GDP ratio will widen to 57.23% in 2020-21, near the legal limit of 60%, it said.

Thailand’s government and the central bank jointly unveiled a ($US58 Billion) 1.9 trillion baht stimulus early this year to cushion the blow from the pandemic but has so far spent only about a third of the amount. The central bank last week called for “more targeted and timely” government policies to support the recovery in the tourism and trade reliant economy, that’s on course for its worst-ever contraction.

Here are some of the highlights of the 2020-21 borrowing plan:

  • 1.47 trillion baht will be new borrowing
  • Debt repayment will be 387.4 billion baht
  • Existing debt under management totals 1.28 trillion baht

With the government spending and borrowings running below planned levels this year. It risks of an increase in full-year borrowings is only a tail risk, according to Radhika Rao, an economist at DBS Group Holdings Ltd. in Singapore. Thailand’s relative success in containing the pandemic curve has helped in the outperformance of its sovereign bonds with yields remaining largely stable and attracting haven flows, she said.

Emergency Funds

Thai government, central bank slow to use special budgets to counter Covid

Source: Bank of Thailand, government ministries

Note: ‘G’ denotes government projects, ‘BOT shows Bank of Thailand plans

The cabinet also approved 291 billion baht investment by 44 non-listed state enterprises next fiscal year, Rachada Dhnadirek, a government spokeswoman, told Bloomberg. The government is targeting a disbursement rate of 95% of the budget, which will finance key projects such as the industrial estate in the Eastern Economic Corridor and the mass transit project in Phuket, she said.

The total investment of state enterprises, including eight publicly listed firms, will increase to 432 billion baht and is set to boost the economy, Rachada said.

A series of stimulus measures meant to drive consumption in the fourth quarter may also help contain the hit to Thailand’s growth this year, Finance Ministry’s Fiscal Policy Office Director-General Lavaron Sangsni said. The economy may contract less than the 8.5% predicted by the ministry and 7.8% estimated by the central bank, he said.

 

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