Parliament should enact a law similar to the “fiscal cliff” legislation of the United States to control Thailand’s public debts, which may exceed more than 60 per cent of the country’s gross domestic product in 2019, economic experts said yesterday.
Thirachai Phuvanatnaranubala, who served as the Yingluck Shinawatra government’s first finance minister, said that due to the risk of higher public debt, a law was needed to manage public debt by restricting the budget for projects stemming from populist policies.
The legislation should require that the government inform the public where the funding for the policies comes from. Parliament should have the power to control government spending, a requirement similar to that in the US fiscal cliff laws.
“Parliament has to concentrate on the government’s off-budget spending. This will help monitor the risk of public debts exceeding manageable levels and losing the credit rating in the long term,” he said.
Thirachai was among panelists at a seminar, “Critique of the Populist Policy and Its Impacts on the Economy, Financial and Fiscal Affairs” at the Golden Tulip Sovereign Hotel. It was organised by the Senate committee on finance, banking and financial institutions.
MR Pridiyathorn Devakula, former deputy prime minister and finance minister, said he was concerned the country’s public debt will surpass 60 per cent of GDP and may reach as high as 80 per cent by 2019.
He voiced support for some of the government’s populist policies, such as the Bt30 medical scheme and the Village Fund, which are cost-effective and provide benefits to the poor. But he was critical of projects that are losing money, such as the rice-pledging scheme, which shows a net loss of Bt189.14 billion.
“If the rice-pledging policy is maintained until fiscal year 2018-19, the government will lose Bt1.47 trillion. This will be a big burden of public debt,” said Pridiyathorn, a former Bank of Thailand governor.
Based on the country’s economic growth average of 4.5 per cent a year from GDP of Bt11.09 trillion as of September 2012, the country’s GDP will be Bt15.62 trillion in September 2019. Public debt is projected to reach Bt10.3 trillion by then, about 65.96 per cent of GDP. This is near the red line for risk management, Pridyathorn said.
“The estimate of 65.96 per cent is based on a conservative scenario. If based on the real behaviour of the government, it will be nearly 80 per cent in 2019,” he said.
The government has promised to keep the public debt below 50 per cent.
Nipon Poapongsakorn, a senior fellow at Thailand Development Research Institute (TDRI), called on the government to avoid off-budget spending.
“The government has to identify the source of funds and how to generate income to cover the spending. Fiscal discipline is needed to ensure sustainable growth and manage the country’s risk of rising public debt,” he said.
Korbsak Phutrakul, a Bangkok Bank executive vice president, said public debt has rapidly increased from 36 per cent in 2008 to 44 per cent last year. Although the ratio was still acceptable, there are signs of a faster increase as the government has added more and more projects.
“We have to warn the public before the country faces the risk of unmanageably high public debt. The global economy is still affected by the US and European financial crises. In the next five years, Asia may face a similar crisis. That’s why we have to manage the country’s public debt now while it is healthy,” he said.