Academic says budget deficit has shot up over two years and will be a burden
Prime Minister Prayut Chan-o-cha yesterday told his critics that the country’s financial position remains strong as evidenced by the large international reserves – currently ranked the world’s 18th highest – while a top academic has cautioned about the ballooning budget deficit which could become a burden for successive governments.
Thailand’s international reserves of US$177 billion, including foreign exchange reserves of US$169 billion, as of January 27, are solid and proof of the country’s creditworthiness in the eyes of the international community and foreign investors, Prayut said.
On Monday, Prayut was upset when asked by reporters about the low treasury reserves, which had dropped to Bt74.9 billion as of last month. Treasury reserves are similar to the government’s current bank account, which, some experts said, are not as important as the international reserves.
Prayut yesterday expressed regrets for getting worked up on the treasury-reserve issue, especially after some social media critics questioned if the country had gone broke under his watch.
In a new Facebook post, Dr Decharut Sukkumnoed, an economics lecturer at Kasetsart University, urged the Prayut government to come up with a clear framework on running budget deficits because they are not good for future generations and the next challenge could be repaying the national debt.
Decharut’s comment followed an earlier statement by Finance Minister Apisak Tantiworawong, who on Monday defended the falling treasury reserves, suggesting that reserves of Bt50 billion to Bt100 billion were enough.
Overall, the treasury and international reserves are different; the former mainly reflects the domestic fiscal position and government cash flow while the latter is a more important indicator of the country’s international financial position and creditworthiness.
Decharut said the current government has increased budget deficits over the past two fiscal years to an average of Bt395 billion per year, or 17.1 per cent of each year’s revenue budget, compared to only 12.6 per cent recorded by five previous governments.
However, Banyong Pongpanich, executive chairman of Kiatnakin Bank, said in his Facebook post that the magnitude of the budget deficits to stimulate economic growth at this time is debatable because some economists might say the current deficit is still low.
Banyong said the treasury reserve account is more like a cash management account but the level of public debt resulting from budget deficits are more important, which should be measured as a percentage of the country’s gross domestic product (GDP).
However, Banyong warned that prolonged budget deficits could lead to a national debt crisis, so public money must be used efficiently.
In defence of the government’s fiscal position, the prime minister said his administration had been cautious on spending programmes so it never resorts to the more important foreign-exchange reserves, which are crucial for maintaining international confidence in Thailand’s financial standing.
Prayut said the government could borrow to boost its domestic reserves if it became too low and that the policy is to borrow when necessary in order to avoid paying interest on the borrowing when funds are not yet used.
The prime minister also urged critics to investigate any irregular spending by government agencies, as his administration had nothing to hide.
“I am not angry at academics who are critical but it’s better for academics to help create a better understanding. Personally, I do not want to see any wasteful budget spending and illegitimate spending,” said Prayut.