The Council of State has proposed loosening the requirement of a two-year payback for government when it borrows to finance any populist policy, aiming to keep subsequent administrations from running out of resources for investment if the fiscal budget is constrained.
The requirement is part of a draft bill of the Public Finance Act, now under the Council of State's final review.
The draft bill was formulated as a tool to legislate a fiscal sustainability framework, prevent abuse of discretionary power by policymakers and avoid the risk of the government shouldering too much liability incurred from pursuing populist policies.
The Council of State has proposed tweaking the payback time frame concerning borrowing money, said an informed source at the Finance Ministry.
The two-year payoff requirement is considered too stringent by the Council of State and could cause a lack of budget for funding investment or other beneficial projects, the source said.
But the Council of State requires the draft bill to stipulate that paying off debt incurred from unconventional budget expenditures resulting from government policy must be the government's priority when the state's fiscal position permits it.
The source said the payback time frame for borrowing to fund projects regarded as populist policies is intended to prevent the spending amount from growing so big that such projects become a long-run fiscal burden.
Krisada Chinavicharana, director-general of the Fiscal Policy Office, said the draft bill must seek the government's approval again after the Council of State's interpretation is completed.
The draft bill is expected to go before the National Legislative Assembly for deliberation by May.
The plan to set a fiscal discipline framework was initiated after the 2006 coup. The military-backed regime felt that the Thaksin Shinawatra government had spent too much money on "pork barrel" policies that could weigh down future governments.
The draft bill was dusted off by the current government after Yingluck Shinawatra's administration spent more than 500 billion baht to finance its rice-pledging scheme, which set a pledging price 40-50% greater than the market price.
The scheme created a debt that by some estimates could take as much as 16 years to pay off.