Finance Minister Apisak Tantivorawong yesterday rushed to soothe market jitters after treasury reserves slid to 70 billion baht in 2016, saying the reduction is in line with a state policy to cut down on interest expense.
Mr Apisak said the sharp decline in treasury reserves did not indicate that the government is going broke.
An excessive level of treasury reserves comes at the expense of an interest burden as a part of treasury reserves is borrowing, he said.
The revelation that treasury reserves sank to 74.9 billion baht at the end of last year from 386 billion at the end of 2015 fanned fears over the government's fiscal health after recent excise tax hikes on lubricant and jet fuel.
Cutting treasury reserves to an appropriate level is part of a policy to slim down interest costs, said Mr Apisak, adding that the government must shoulder an interest burden of 2 billion baht a year for every 100 billion in borrowing based on a 2% interest rate.
A range of 50-100 billion baht is the proper level of treasury reserves that the government should hold, he said.
Another part of treasury reserves is government revenue, most of which derives from taxes, said Mr Apisak, adding that the government's tax revenue collection efforts were on point.
The government gathered 369 billion baht in revenue during the first two months of fiscal 2017, surpassing its target by 19.7 billion, the Fiscal Policy Office said. The Revenue Department, the country's largest tax-collection agency, gained higher-than-targeted revenue, while the Excise Department and the Customs Department fell short of their targets for the two months to November.
During last fiscal year, the government collected 2.39 trillion baht in revenue, surpassing its target by 2.7%. State revenue exceeded the collection target by 63.5 billion baht and surpassed the fiscal 2015 total by 180 billion.
Mr Apisak reiterated that the government does not have a fiscal problem despite the drop in reserves. It still has room to borrow almost 300 billion baht as planned to finance a 390-billion budget deficit after having already borrowed around 100 billion, he said.
Moreover, the Finance Ministry can issue treasury bills to borrow an additional 80 billion baht for short-term debt.
In a related development, Mr Apisak said the recent excise tax hikes on lubricant and jet fuel were fair, as the jet fuel tax had not been increased for two decades. Before the latest hikes, jet fuel was taxed at 20 satang a litre, well below the excise taxes on diesel and gasoline at 5 and 6 baht a litre, respectively.