Govt’s latest COVID-relief loan triggers fears over transparency, public debt
Controversy has erupted over the government’s move to borrow another huge sum to aid recovery from the virus crisis.
The government opted for an emergency decree to sanction an extra Bt500 billion in borrowing after the latest wave of COVID-19 hit businesses and people already suffering from earlier outbreaks, killing chances of a quick economic recovery.
Published in the Royal Gazette on May 25, the decree authorizes the Finance Ministry to borrow Bt500 billion up until September 2022 to address the virus fallout.
The decree was the second passed to deal with COVID-19 after the Bt1-trillion borrowing decree last year.
“The extra Bt500 billion may not be adequate, and the borrowing should be done via normal Parliament processes for the sake of transparency, not by issuing an emergency decree,” said Anusorn Tamajai, former dean of Rangsit University’s Economics Faculty.
Supant Mongkolsuthree, chairman of the Federation of Thai Industries, is supporting the move, citing businesses’ need for more financial support.
However, former finance minister Thirachai Phuvanatnaranubala said the government had violated fiscal disciple by issuing the two decrees for borrowing. He filed a charge at the Administrative Court on May 24, asking judges to cancel the Cabinet’s resolutions to approve the Bt500 billion emergency loan and the previous loan of Bt1 trillion.
He clarified that it wasn’t the borrowing he objected to, but rather the lack of transparency in how the money was being allocated by a single government-appointed committee. Allocation of such huge funds should be done via normal procedures, he added.
Thailand’s household debt increased 3.9% to 14.02 trillion baht in the fourth quarter of last year, representing 89.3% of gross domestic product (GDP), said Mr. Danucha Pichayanan, secretary-general of the National Economic and Social Development Council, today. He noted that the increase, although at a slower rate, was in line with economic contraction and reflected public concern over creating new debt.
New loan to address same 3 areas
The new borrowing followed a report suggesting the government would borrow an extra Bt700 billion to combat the contagion, support people and businesses as well as spur economic recovery.
Under the Bt500 billion borrowing plan, the government will spend Bt30 billion on medicine, equipment, vaccines and research to contain the virus. Another Bt300 billion will fund relief packages to help people and businesses impacted by the pandemic.
The remaining Bt170 billion will fund economic recovery projects to maintain employment and boost investment and domestic consumption.
More economic pain as cases soar
Thailand’s caseload has surged since early April, with new cases rising to over 3,000 per day. The third wave of infections ended talk of early recovery after the economy shrank 2.6 percent in the first quarter this year, following a sharp 6.1 percent contraction last year.
The unemployment rate also rose to 1.96 percent in the first quarter, up from 1.89 percent in the fourth quarter last year, according to the National Economic and Social Development Council (NESDC). The labor market outlook is bleak, with businesses tending to delay moves to employ new graduates.
Meanwhile, Thailand is unlikely to reopen to foreign tourists anytime soon amid sluggish mass vaccination and low public confidence in the government’s plan to inoculate over 50 million people by the end of the year.
Reopening of the tourism industry is vital for economic recovery. Tourism revenue accounted for 12 percent of Thailand’s GDP before the pandemic. The NESDC forecasts the economy will grow between 1.5 and 2.5 percent this year.
The economy shrank 2.6 percent year on year in the first quarter, according to the National Economic and Social Development Council (NESDC)’s quarterly report released on May 17. Thailand has now suffered economic contraction for five consecutive quarters since the virus outbreak in early 2020.
Slow rollout of Bt1trn loan spending
Critics also question the effectiveness of the Bt1-trillion emergency borrowing, given the current unprecedented rate of infections and delay in mass vaccination.
As of May 21, the Cabinet had approved 287 projects worth Bt817.2 billion, while the Finance Ministry had borrowed Bt703.8 billion of the Bt1 trillion permitted. Funds disbursed totaled Bt680.1 billion.
New loan to boost economy – and public debt
Finance Minister Arkhom Termpittayapaisith insisted the additional Bt500 billion loan will add an extra 1.5 percentage points to economic growth this year and next.
The Finance Ministry projects a rise in public debt to 58.56 percent of GDP by the end of September, up from 54.3 percent currently.
By Thai PBS World’s Business Desk