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The Cabinet yesterday slashed the budget for fiscal 2010, which starts on October 1, to Bt1.7 trillion, down from Bt1.9 trillion.

Funds earmarked for state investment projects were lowered to Bt1.35 trillion, from 1.51 trillion before, as the domestic political turmoil and global economic downturn will reduce tax collections, said Budget Bureau director Bantoon Supakvanij.

Lower tax revenue

The economy is forecast to contract 2.5-5 per cent this year, against a previous projection of 2-3-per-cent growth.

"To finance new investment projects, state agencies will be asked to borrow more instead of depending on the government budget," said Bantoon, adding that these agencies needed to use their resources more productively.

Duangsmorn Worarith, deputy director of the Budget Bureau, said the government would cut transfers to local governments, the military's budget and the budget for foreign trips previously proposed by various agencies.

Local government bodies, for example, will receive reduced transfers from the central government, amounting to only Bt148 billion, while their own revenue is estimated at Bt201 billion.

The revised budget allocates Bt1.33 trillion for present spending, Bt307 billion for capital spending and Bt66 billion for principal debt repayment.

A smaller budget will also help the government maintain fiscal discipline, as tax collection has been falling. The budget deficit for fiscal 2010 will, however, remain intact at about Bt350 billion, while the ratio of public debt to gross domestic product (GDP) will be kept below 50 per cent.

Prime Minister Abhisit Vejjajiva said the economy was projected to face negative growth of 2-5 per cent, so the government must cut its fiscal-2010 expenditure budget.

Over the next two weeks, details of the budget cut will be finalised and approved by the Cabinet before being submitted to Parliament.

He said the tourism sector and consumer and investor confidence had been hit hard by domestic and global factors, prompting the government to lower its GDP forecast.