Bank of Thailand governor Sethaput Suthiwartnarueput recently recommended the government add at least 1 trillion baht to the country's debt to address the severe impact of the pandemic and improve long-term growth prospects.
This is because the economy has been hard-hit by the Covid-19 pandemic, disrupting tourism -- one of the country's main income generators.
In addition, the pandemic has lowered household incomes and put people out of jobs -- elements that require the government to provide fiscal help.
It is projected that 2.6 trillion income willl have vanished from growth by 2022, during the two years of the pandemic. Indeed, the country lost 1.8 trillion baht in the year 2020-2021. Next year, it is projected that another 800 billion baht will disappear.
According to the central bank governor, it is reasonable for the government to borrow an additional 1 trillion baht, even if the borrowing results in the country hitting its debt ceiling of 70% of gross domestic product (GDP) by 2024.
If the government spent the money wisely and maintained fiscal discipline, the BoT governor believes the debt ceiling issue is no reason for worry as the debt ratio will drop when the economy recovers.
The Bank of Thailand is among the most important and authoritative agencies, with in-depth economic data the public cannot access.
Therefore, when the central bank governor makes such a statement, we know the matter must be crucial. Apart from the BoT, the Thailand Development Research Institute (TDRI) has suggested the government borrow 2.4 trillion baht for economic rehabilitation.
Yet the BoT's recommendation has been given the cold shoulder by the government, particularly the Ministry of Finance. Minister Arkhom Termpittayapaisith said there was no need for the government to borrow additional money as the existing 500-billion-baht loan under the 2021 emergency loan decree was adequate for the situation.
The government issued an emergency loan decree last year allowing it to borrow 1 trillion baht to combat the pandemic, followed by a second decree this year for another 500 billion.
The government's reaction is not beyond expectation. "Borrowing" is a bitter pill for the country which has run budget deficits for many years.
Thailand has painful memories of the Tom Yum Kung financial meltdown in 1997. At the time, Thailand had to borrow large sums from the International Monetary Fund (IMF). Understandably, the government is nervous that borrowing an additional 1 trillion baht might backfire on it politically one year before the next election.
Members of the public don't know whether the country really needs another 1 trillion baht loan, nor do they care about the debt ceiling. People are suffering and want to see the government improve its performance on Covid measures, rescue the economy from its comatose state, and provide financial help.
The government might be able to pour cold water on the BoT governor's proposed borrowing, but it must come up with a better approach to provide relief measures and rescue the economy. The hardship has stemmed partially from the government's own mishandling of the crisis.
Thailand needs more capital to repair the economy and further borrowing cannot be ruled out. But the most crucial aspect is the government must utilise the capital wisely and efficiently, first and foremost.
