Budgetary reform and Thailand's new constitution

Economy May 26, 2015 01:00

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THE NEW CONSTITUTION, which is in draft form at present, calls for the "reform" of public administration in many directions, and budgetary reform is chosen here as a topic for discussion simply because it involves a huge amount of public money.

Two kinds of budgetary reforms are noted. First, at the macro level, is a return to the fiscal discipline principle, which involves the rules that limit government borrowing and contingent liabilities and avoid the risk of increasing public debt. Second is area-based budgeting as a more efficient instrument to lessen poverty and income inequality. Fiscal discipline was long adhered to under the Budget Procedure Act BE2502 (1959), under which the annual budget deficit is limited to 20 per cent of the total budget expenditure, including debt servicing. As long as this rule was strictly observed there was no problem, but in recent years we have witnessed a departure from the rule, for different reasons. 
For example, under the Abhisit Vejjajiva administration, Parliament enacted a law that empowered the government to borrow money to finance the “Thai Khem Khaeng” projects, and the borrowed money was treated as “non-budgetary”, which in effect evaded the parliamentary oversight audit. Under the Yingluck Shinawatra government, a law was enacted to allow the borrowing of a huge amount – Bt2 trillion – for infrastructure development. However, that attempt was aborted.
The new draft constitution stipulates that government borrowing can only be done through an annual budgetary act or an extra-budgetary act. As such, the deficit cannot exceed 20 per cent of total budget expenditure and the use of borrowed money must be accountable to Parliament. As well, there must be an amendment to the Budgetary Procedure Act of 1959 to correct weaknesses (especially institutional matters). For now, however, we still have little knowledge of what will be amended, so we will have to wait and see.
What does the term “area-based budgeting” mean? The Budgetary Procedure Act defines public agencies that are eligible for budgetary requests, such as ministerial departments. Every year, they submit their requests to the Budget Bureau, which acts as intermediary for Cabinet consideration and, later on, parliamentary approval. This budgetary appropriation is referred as a “departmental budgeting”. 
At present, 315 departmental agencies receive annual budget appropriations and act on behalf of the government in delivering public services, developmental initiation and the emergency needs of people. Their weaknesses with respect to the task of poverty reduction are that the assignment is unclear and overlapping, and that this task would be better assigned to a decentralised and horizontal administration. 
Reform towards area-based budgeting is believed to be more efficient in handling poverty reduction. Its strengths include clear responsibility, no overlapping, and an opportunity for local people to participate and to monitor developmental outcomes. 
Direk Patmasiriwat, Graduate School of Development Economics, National Institute of Development Administration, can be reached at direk.p@nida.ac.th.