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The Abhisit Vejjajiva government is now stuck with its Bt800-billion loan package to stimulate the economy. Since the government coffers are empty, the administration needs to borrow money to fill up its budget deficit due to revenue shortfall and make investments.

Of this total borrowing package, Bt400 billion has been presented as an executive decree for the sake of swift execution. The other half, earmarked for long-term spending, will be presented as legislation.

However, the Pheu Thai Party is blocking the executive decree from going through the National Assembly, arguing that there is no element of emergency in this bill. This has forced the Bt400-billion package, presented as part of the executive decree, to be forwarded to the Constitution Court for deliberation. The Constitution Court will next week take up this case as an urgent matter because the Abhisit government is shouting that it has run out of cash to stimulate the economy and create jobs.

The devil is still in the details as to how the Abhisit government will be spending this huge Bt800-billion package. This amount is equivalent to about 10 per cent of Thailand's gross domestic product (GDP). If the government goes ahead with borrowing this amount, the public debt to GDP will rise to about 60 per cent.

Everybody agrees that the government needs to do something about boosting the economy and creating jobs, but not everybody wants to see the government waste this money and put Thailand's fiscal position at risk.

In theory, a one-time stimulus budget should help create jobs. But the Bt160-billion stimulus package introduced when Abhisit assumed office was earmarked for consumption.

According to MR Pridiyathorn Devakula, former finance minister and Bank of Thailand governor, only Bt7 billion of that amount would have been spent on creating jobs, when actually the government should have focused more on generating employment.

There are other countries that have had a high percentage of public debt to GDP. Japan, for instance, used to have a public debt accounting for more than 120 per cent of the GDP, while the public debt of the United States was more than 80 per cent. The proportion of public debt should be at a level where we will be able to service the debts when the economy returns to normal.

The key question is when are we going to see normal economic conditions again?

Depression is still ravaging the global economy. In the event of an L-shaped depression, it will take at least a decade before the world starts to recover. Or if global capitalism were to crack, it would take much longer to mend the economic and financial system.

This is the worst-case scenario that the Abhisit government must bear in mind while administrating the country. It cannot go along with the general sentiment or flashy news reports that there are signs of green shoots of recovery.

If the depression is prolonged, Thailand needs to have the capacity to survive. The most important thing is that it should keep its fiscal health at the best position. Thailand's fiscal position is quite sound with low public debt, though we will still see a revenue shortfall of almost Bt300 billion in the fiscal 2010 budget. If that is to be the case, then the government should try to live within its means and not overburden itself with the loan, which amounts to spending money for the future.

The global economy is in need of restructuring or a drastic reform to rid the excesses of the past several decades. This restructuring will be painful because it will have to involve liquidation, revamping or even bankruptcy. So far, this process of liquidation or bankruptcy has yet to start in earnest because the US Federal Reserve has been pumping massive funds into the global financial system to keep the world alive.

The US Fed has been looking at the problems facing the US economy or even the world as those of liquidity rather than insolvency. Boosting liquidity cannot tackle insolvency in the financial system and a bankrupt corporate sector.

Amid this gloomy global outlook, the Abhisit government should reconsider its Bt800-billion borrowing package carefully. We can't borrow on this massive scale for another two or three years, especially if the depression drags on longer than expected. Next, the government should ensure that it spends the borrowing package wisely. It should closely study its options, and see which will produce quick results and be the most-effective way to spend the taxpayers' money. Besides, the government should make the right alliances that will work in tune with each project.

Of the Bt400-billion package proposed in the executive decree, about Bt50 billion to Bt60 billion will go to rail projects that will serve the interests of a coalition partner. We all know that politicians love mega-projects because they all try to squeeze at least 30 per cent of cash from every project. It is this Cabinet's responsibility to not let this happen.

In addition, the Abhisit Cabinet should take into account the 40 million Thais who are farmers or labourers and ask if any of the cash from the borrowing package will benefit them instead of the politicians.