The much-debated digital wallet scheme promised by the Pheu Thai Party finally got off the ground in 2024, although in an abridged form.
The government disbursed 144.5 billion baht as handouts to 14.4 million low-income people and disabled groups.
The coalition government has modified and downsized the digital wallet scheme that Pheu Thai had promised voters during the campaign for the 2023 general election.
The basic implementation of the scheme has been altered as the government is using cash, and not digital tokens as planned earlier, for the handouts.
The Pheu Thai Party had originally pledged to citizens aged above 16 years a one-time digital deposit of 10,000 baht per person distributed via the block chain ledger.
A total of 50 million people of the country’s 66 million population would have been eligible for the handout, which would have cost the government around 560 billion baht.
Funding the handout scheme
During the election campaign for the May 2023 general election, Pheu Thai had painted a rosy picture that the scheme would stimulate economic growth leading to higher tax collections, as a result lower borrowings would be required to partially finance the project.
The party informed the Election Commission that funding for the 560-billion-baht flagship project would come from four sources.
First, it forecast a higher tax collection of 260 billion baht. Second, the party estimated higher corporate income tax collection estimated at 100 billion baht.
Third, it would allocate money from the annual budget for fiscal year 2024 totalling 110 billion baht to finance the project. Fourth, it expected to save 90 billion baht by cutting overlapping spending on various welfare schemes.
It also promised that the scheme would be implemented quickly after taking office.
When Srettha Thavisin was approved by Parliament as 30th prime minister of Thailand in August, he promised in September last year that digital cash would be deposited in the bank accounts of eligible citizens by February 1, 2024.
Due to accumulated fiscal deficit and legal hurdles, the Srettha government could not implement the money transfer as promised.
The then PM came up with a plan to introduce borrowing bills for 500 billion baht but he had to backtrack due to strong opposition and the danger of the bill violating the fiscal discipline law.
In April this year, Srettha came up with the idea of partly borrowing money from the state-owned Bank for Agriculture and Agricultural Cooperatives to finance the digital wallet scheme, but faced a legal hurdle again.
Srettha’s tenure ended abruptly when the Constitutional Court unseated him as PM in August, leaving the digital wallet scheme in limbo again.
The label of populism
The digital wallet scheme has been controversial and faced criticism as wasteful populist spending that would sharply increase public debt, which has already exceeded 60 per cent of gross domestic product (GDP).
Experts warned about the alarming level of public debt, given the sluggish economic growth and persistent fiscal deficits. Economists are not buying the government’s narrative of higher economic growth and higher tax collections stemming from this scheme.
Economists have also pointed out the high opportunity cost of the scheme and urged the government to direct the limited financial resources towards productive projects such as mass transit systems in other parts of the country.
They have expressed their doubts about the government’s funding sources.
The World Bank has urged the government to use targeted incentives instead of blanket cash handouts. The bank said those who are in need, such as those badly hurt by the COVID-19 fallout, should be helped.
Faced with such strong opposition, and partly because funding the scheme was not easy, the government delayed its implementation.
Changing criteria
Unable to abandon its promise to voters, and the financial challenges, the government was eventually forced to use the annual budget funding.
In an attempt at rationalising the scheme, the Srettha government came up with new criteria for eligible persons: They must not have annual income exceeding 70,000 baht a month; their bank deposits must not be more than 500,000 baht.
Eligible citizens would have to register with the state-developed "Tang Rat" application between August 1 and September 15.
It cancelled the previous plan of confining the spending to within a 4-kilometer radius of the recipients' home districts.
After Srettha’s departure, newly appointed Prime Minister Paetongtarn Shinawatra modified the digital wallet scheme again by targeting the low-income group of 13.5 million holders of welfare cards and 1 million disabled people.
The Paetongtarn government began the cash transfers in September until December 19, according to the Finance Ministry.
While voters of Pheu Thai’s political base seem to be satisfied with the transfers and want the government to fully implement the digital wallet scheme, some small shopkeepers are complaining that the handouts had not led to any increased spending by consumers when compared with co-payment schemes implemented by previous governments.
The National Economic and Social Development Council estimates that the economic impact of the scheme would be reflected in the data of the year’s fourth quarter.
The state planning agency has forecast GDP to grow 2.6 per cent this year, after recording1.6 per cent in the first quarter, 2.2 per cent in Q2 and 3 per cent in Q3.
The Finance Ministry reported this month that the government had transferred from September 25 to December 19 a total of 144.5 billion baht to 14,450,168 individuals, or 99.19% of the total targeted group of 14.55 million persons.
A total of 33,767 welfare card holders and 3,918 disabled persons did not receive the money as they did not have PromptPay accounts or their accounts were closed by banks due to lack of any activity for a long time, according to the Finance Ministry.
The National Statistical Office surveyed 31,500 handout recipients and found that 75% of them had spent money on food and beverages, household necessities and utility bills.
The top three preferred retailers were: grocery and small shops in their communities; street vendors and flea markets; and convenience stores and minimarts.
Paetongtarn has promised to proceed with implementation of the second and third phases of the digital wallet scheme next year.
