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Hunt for cash: Post-flood govt borrowing

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With flood recovery looming & tax reductions galore (corporate, first car, first home...) govt frantically searching for ways to pay for it all. 

money money

Click button to listen to Post-flood Increase In Government Borrowing to download

IN Print: Clearing the decks for more debt by Kamol Hengkietisak


The Pheu Thai-led government is embarking on massive borrowing to rehabilitate infrastructure damaged by last year's floods, at the possible cost to fiscal stability, Post Today said.

The government is cutting public debt by reducing its stakes in state enterprises PTT and Thai Airways, to less than 50%, so the two publicly listed companies will no longer enjoy government enterprise status. At the same time, however, it is embarking on a massive spending programme, which some economists say could endanger fiscal stability.

Its new fondness for debt stands in stark contrast to when the Pheu Thai Party was in opposition

Then, the party blasted the Abhisit Vejjajiva administration for borrowing to cover budget shortfalls.

The party vowed that if it was elected to office, it would pay off the country's debt so the present generation would not be saddled with public debt.

Now the Pheu Thai Party is in office, it has conveniently forgotten the rhetoric of its opposition days. 

The government has decided to borrow large amounts to repair and build infrastructure after the floods, to assure the disaster will not happen again. 

When the Yingluck Shinawatra government took power five months ago, public debt was about 4.2 trillion baht, or at 40% of the country's gross domestic product (GDP).

The Finance Ministry has laid out a fiscal framework under which public debt should not exceed 60% of GDP.  

It also sets a ceiling for debt servicing at 15% of the annual budget. 

The government allocates about 11% of its budget to pay the interest burden on the debt, which is still less than the ministry's ceiling

The country's GDP is about 10 trillion baht, which means the government can borrow another 2 trillion baht before the limit is reached. 

Post Today believes that 2 trillion baht is more than enough to lubricate the economy in normal times. 

However, since the floods struck, the government has approved various plans to accelerate spending that may jeopardise the ministry's fiscal framework. 

The government's spending plans will take the deficit from 350 billion baht to 400 billion baht. 

As there are only about seven months left before the next budget round begins in October, the government will have to take care that the money is spent well, it said. 

The government last week issued four emergency decrees empowering the Finance Ministry to borrow money to manage the country's water resources and to implement various projects, to the tune of about 350 billion baht. 

One of the emergency decrees establishes the National Disaster Insurance Fund, with seed money of 50 billion baht. 

The government this week also approved plans to revive and build infrastructure and logistics to the tune of 2.27 trillion baht, with the private sector chipping in about 1 trillion baht. 

The government will need to borrow about 1.27 trillion baht. 

For next year's budget, the government plans to continue running a deficit of no less than 400 billion baht to stimulate the economy

Suchart Thadathamrongvej, a former finance minister in the Somchai Wongsawat government, and newly appointed education minister in the government cabinet reshuffle this week, remarked: "The government will not borrow excessively and the country will grow faster if more money is invested. Worrying too much about a fiscal deficit and adopting austerity measures will stagnate the country's economy. "

Mr Suchart is a key man in Pheu Thai's economic team. 

Post Today said that judging from the government's spending and borrowing plans, public debt may soon exceed 6 trillion baht, or 60% of GDP, as well as exceeding the 15% debt servicing ceiling set by the ministry.

This has necessitated prompt action in the form of an emergency decree to transfer the Financial Institutions Development Fund's (FIDF) 1.14 trillion baht worth of debt, currently shouldered by the Finance Ministry to the Bank of Thailand. 

This will ease the ministry's debt servicing burden by some 65 billion baht a year.

The decree enables the government to immediately lower public debt equivalent to about 10% of GDP, which will give the Yingluck administration more room to service public debt, so payments make up no more than 15% of the budget.

Earlier, the government had planned to issue legislation to empower the government to use the central bank's reserves to gradually pay off the FIDF's 1.12 trillion baht debt incurred during the 1997 financial crisis, but the measure was widely opposed for fear it could jeopardise monetary stability.

The government retreated and last week issued an emergency decree to transfer the debt liability to the central bank as well as empowering the central bank to ask commercial banks to make additional contributions in deposit insurance.

The current rate of 0.4% on deposits will rise to the ceiling rate of 1%, which will go into servicing the FIDF's debt.

The government is trying to reduce its public debt liability further by reducing its stakes in PTT and Thai Airways to less than 50%, so the two publicly listed companies will no longer enjoy government enterprise status. 

In that event, the government would not have to guarantee their borrowings, which stand at 1 trillion baht. Public debt would fall by a further 10% of GDP, which would give the government more room to borrow further. 

Post Today said the government's attempts to reduce public debt by spinning some debt off to various entities will make it harder to manage the public debt as a whole. 

After the 1997 financial crisis, the Chuan Leekpai government combined all public debt from various entities to come under the Finance Ministry's management.

The government believed it could service the public debt more effectively with all debt brought under the ministry's Public Debt Management Office (PDMO). 

It seems the Pheu Thai government wants to take us back to the situation which existed before 1997, when debt was spread over many entities, and was harder to scrutinise, and manage.

A PDMO source said while borrowing to invest in infrastructure is necessary, this government is placing too much emphasis on borrowing, which may jeopardise fiscal discipline and compromise debt servicing.

Instead of finding more tax revenues to balance the increased borrowings the government is doing the opposite, reducing corporate tax and embarking on other tax other reduction policies including the First Car and First Home schemes.

The government could increase value-added tax, raise taxes on tobacco and alcohol, land and inheritance taxes, but chooses not to do for fear of hurting the party's financiers and support base.

It is not enough to hope that tax revenues will increase automatically with economic growth, without the need to raise taxes, as this has rarely happened under any government over the past 10 years.

If the increased borrowing is to stimulate the economy, resulting in growth in tax collection revenue to balance the shortfall, the government must invest only in essential infrastructure that will boost competitiveness, the paper argued.

(Source: Bangkok Post, IN Print, Clearing the decks for more debt, 21/01/2012, Kamol Hengkietisak, link

Government Debt Vocabulary

debt - an amount of money that you owe หนี้
public debt - government debt

clearing the decks - meaning: removing everyone on a ship so that you can put more people on the ships (removing official debt so that you can borrow more) 
clearing the decks for more debt

cash - money that is immediately to be used (coins, notes)
galore - in very large amounts and quantities

embarking - starting, beginning
massive - very large in size, amount or numberใหญ่โต มหาศาล
rehabilitate - to return someone or something to a good or healthy condition, state or way of living ฟื้นฟูสุขภาพ
infrastructure - the high-cost facilities that everyone in the economy shares (water, roads, electricity, trains) สาธารณูปโภค

fiscal
- related to government spending; connected with the government budget, i.e., public money เกี่ยวกับงบประมาณ
stability - when a situation does change suddenly and unexpectedly, so that people can operate normally and successfully ความมั่นคง ความมีเสถียรภาพ
fiscal stability - when a government is not borrowing too much (only  borrowing an amount it can safely pay back in the future, even if interest rates increase a lot)

the Pheu Thai-led government is
embarking on massive borrowing to rehabilitate infrastructure damaged by last year's floods, at the possible cost to fiscal stability

state - government รัฐ
enterprises - companies; an organization, especially a business กิจการ, บริษัท,อุตสาหกิจ,วิสาหกิจ
state enterprises - companies owned and operated by the government
status - official or legal position สถานภาพ
status - the state or condition at a point in time  สถานะ

the government is cutting public debt by reducing its stakes in state enterprises PTT and Thai Airways, to less than 50%, so the two publicly listed companies will no longer enjoy government enterprise status

endanger - to put into danger ทำอันตราย ทำให้ตกอยู่ในอันตราย
at the same time, however, it is embarking on a massive spending programme, which some economists say could endanger fiscal stability.

fondness for - liking something a lot (example: He weighs 200 kilos due to his fondness for chocolate cake.)
stark - very clear to see, very obvious, cannot be avoided ชัดเจน ทนโท่
contrast - a difference between two things when you compare them; a noticeable difference ความแตกต่าง
stands in stark contrast - is very different
opposition - of a political party that is not part of the government or a group which is against the government ฝ่ายค้าน ผู้ต่อต้าน

Its new fondness for debt stands in stark contrast to when the Pheu Thai Party was in opposition

blasted - criticised severely โดนว่า
administration - one government that a country has for a period of time
budget - the amounts of money that an organisation has available to spend on different things during a period งบประมาณ (See Wikipedia)
shortfalls - when the supply is not enough
borrowing to cover budget shortfalls - when taxes are not enough to pay for government spending so the government borrows money to pay for it  

the party blasted the Abhisit Vejjajiva administration for borrowing to cover budget shortfalls.

vowed - promised
pay off the country's debt -
pay back the money the government borrowed to pay for government spending
generation - a group of people in society who are born and live around the same time รุ่น (คนรุ่นต่างๆ)
the present generation - the people who are living now (and will have to eventually pay taxes to pay for government borrowing)
saddled with public debt -
when the government has a difficult situation of having to pay back a large amount of money

the party vowed that if it was elected to office, it would pay off the country's debt so the present generation would not be saddled with public debt

rhetoric - language that tries to convince or persuade people (but may not be completely honest and sincere)
now the Pheu Thai Party is in office, it has conveniently forgotten the rhetoric of its opposition days. 

repair - to fix something that is broken or damaged ซ่อมบำรุง
assure - to tell something that something is true or will definitely happen ให้ความมั่นใจ, ยืนยัน
disaster - something very bad that happens and causes a lot of damage or kills a lot of people ความหายนะ ภัยพิบัติ
the government has decided to borrow large amounts to repair and build infrastructure after the floods, to assure the disaster will not happen again

took power - when the new government began after winning the election  
gross domestic product (GDP) - the total value of all the goods and services produced by a country in one year (See Wikipedia)

when the Yingluck Shinawatra government
took power five months ago, public debt was about 4.2 trillion baht, or at 40% of the country's gross domestic product (GDP).

framework - a system of rules, ideas or beliefs that is used to plan or decide something ขอบข่ายงาน, โครงร่าง
fiscal framework - a system of rules to guide how the government spends money and how it pays or borrows for this spending
laid out a fiscal framework - create a new fiscal framework   
exceed - to go beyond an official limit; to be greater than a number or amount เกินปริมาณ t เกินกว่าที่กำหนด

the Finance Ministry has laid out a fiscal framework under which public debt should not exceed 60% of GDP

debt servicing - the act of making regular payments to a lender that you have borrowed money from; the payments that are made
ceiling - an upper limit เพดาน ขีดจำกัด
ceiling for debt servicing - the greatest amount of money that can be used to pay back money that was borrowed during a period
annual
- happening once a year ประจำปี
annual budget - the amount of money available each year for spending

It also sets a ceiling for debt servicing at 15% of the annual budget. 

allocates - uses, take a part of the whole and set aside for some use
interest - payments made for the use of another's money for a period of time
burden - a responsibility, a difficult thing that must be done, a heavy load to carry ภาระ (See glossary)
the interest burden on the debt - the interest that must be paid for borrowing (the cost or fee for borrowing)
The government allocates about 11% of its budget to pay the interest burden on the debt, which is still less than the ministry's ceiling. 

limit - a highest or lowest amount
reach limit -
the country's GDP is about 10 trillion baht, which means the government can borrow another 2 trillion baht before the limit is reached. 

lubricate - add oil to a machin to make it operate smoothly
lubricate the economy - do things to make the economy operate smoothly
Post Today believes that 2 trillion baht is more than enough to lubricate the economy in normal times

accelerate - go faster and faster , at an increasing rate; to cause to happen more quickly เร่ง
accelerate spending - spend money more quickly
jeopardise - create a situation with possible failure or loss
jeopardise the fiscal framework 
the floods struck, the government has approved various plans to accelerate spending that may jeopardise the ministry's fiscal framework. 

deficit - when you spend more than you receive (has to be financed or funded by borrowing)
the government's spending plans will take the deficit from 350 billion baht to 400 billion baht 

round -
budget round -
take care that - be careful that
as there are only about seven months left before the next budget round begins in October, the government will have to take care that the money is spent well, it said

spent - used ที่ใช้ไป
issued - made available ออกใหม่
emergency - an unexpected situation involving danger in which immediate action is necessary เหตุฉุกเฉิน
emergency decree
issued emergency decree

resources - things such as money, workers and equipment that can be used to help achieve something ทรัพยากร
resources - things that you need to achieve something ทรัพยากรที่มีอยู่
water resources
implement - put a plan into action, make a plan work; to make something such as an idea, plan, system or law start to work and be used นำมาใช้ นำ แผนหรือนโยบายมาปฏิบัติ
to the tune of - around the amount (a large amount)

The government last week issued four emergency decrees empowering the Finance Ministry to borrow money to manage the country's water resources and to implement various projects, to the tune of about 350 billion baht. 

seed money - an amoung of money used to start a new company or project
one of the emergency decrees establishes the National Disaster Insurance Fund, with seed money of 50 billion baht. 

revive - being back to life, get started once again after stopping ฟื้นชีพ ชุบชีวิต ทำให้ฟื้นชีพ
logistics - the transporting and storing goods on the way from factory to consumer การขนส่งสินค้า การขนส่งและจัดจำหน่ายสินค้า (See Wikipedia and previous article)

sector - a part of the economy ภาคเศรษฐกิจของประเทศ (public sector = government, private sector = all businesses, household sector = families and consumers, banking sector,...) (See Wikipedia)
private sector - all the businesses in an economy

chipping in - giving some money to help out with a project

The government this week also approved plans to revive and build infrastructure and logistics to the tune of 2.27 trillion baht, with the private sector chipping in about 1 trillion baht.  The government will need to borrow about 1.27 trillion baht. 

running a deficit - borrowing money to pay for spending 
stimulate -cause increased activity; encourage activity, growth, and development กระตุ้น (See glossary)
stimulate the economy - temporarily spending large amounts of money  to get a slow economy going again after an economic downturn
For next year's budget, the government plans to continue running a deficit of no less than 400 billion baht to stimulate the economy

reshuffle - the process of changing the jobs or responsibilities of people in a particular group or organisation การปรับหรือโยกย้ายตำแหน่งคนในองค์กร
adopting - accepting or starting to use something new นำมาใช้
austerity - when the government reduces the amount its spends by a large amount, when the condition of the economy is bad and the standard of living falls
measures - actions taken to deal with a problem มาตราการ
stagnate - stop moving forward, changing and progressing, stop making progress and advancing

Suchart Thadathamrongvej, a former finance minister in the Somchai Wongsawat government, and newly appointed education minister in the government cabinet reshuffle this week, remarked: "The government will not borrow excessively and the country will grow faster if more money is invested. Worrying too much about a fiscal deficit and adopting austerity measures will stagnate the country's economy."

key - important คนสำคัญ
Mr Suchart is a key man in Pheu Thai's economic team. 

exceeding - passing a limit, going beyond
ministry - a government department dealing with an area of activity กระทรวง (here: finance ministry)
debt servicing ceiling - the highest percentage of money that can be spent from the budget towards paying back loans 

Post Today said that judging from the government's spending and borrowing plans, public debt may soon exceed 6 trillion baht, or 60% of GDP, as well as exceeding the 15% debt servicing ceiling set by the ministry.

prompt - immediate or quick ทันที
decree - an official order or decision made by the ruler of a country
transfer - to move someone or something from one place, vehicle, person or group to another ย้าย  to official arrange for someone else to be the owner of something โอน
shoulder by - when someone does some difficult to do task or responsibility

This has necessitated prompt action in the form of an emergency decree to transfer the Financial Institutions Development Fund's (FIDF) 1.14 trillion baht worth of debt, currently shouldered by the Finance Ministry to the Bank of Thailand. 

ease - to make something easier; less severe, difficult, unpleasant, painful, etc ทำให้ง่าย บรรเทา
This will ease the ministry's debt servicing burden by some 65 billion baht a year.

immediately - happening right after something else with no delay; right away ทันที
equivalent - the same as เท่าเทียมกันกับ
give more room to - give more flexibility to do, make easier to do

The decree enables the government to immediately lower public debt equivalent to about 10% of GDP, which will give the Yingluck administration more room to service public debt, so payments make up no more than 15% of the budget.

issue - to give or provide something official แจกจ่าย
legislation - a law or set of laws suggested by a government and made official by a parliament กฎหมาย, การออกกฎหมาย
empower - to give someone the legal power to do something ทำให้มีอำนาจ
reserves - the amount of foreign currency or gold held by a national bank, which is used for dealing with the national banks of other countries เงินสำรอง
crisis - an urgent, difficult or dangerous situation วิกฤตการณ์ วิกฤต
measure - an action taken to solve a particular problem มาตรการ

Earlier, the government had planned to issue legislation to empower the government to use the central bank's reserves to gradually pay off the FIDF's 1.12 trillion baht debt incurred during the 1997 financial crisis, but the measure was widely opposed for fear it could jeopardise monetary stability.

liability - (legal) responsibility for something or someone ความรับผิดชอบ
commercial - for business purposes
commercial banks - banks that businesses and individuals keep their money in (deposits) and get loans from
contributions - the amount given by each member to the shared fund
deposit - to leave something somewhere ทับถม, สะสม
insurance - a system of protection against loss, a person pays money every month (premiums) for a guarantee that the company will pay them money if they or their property is damaged or lost (See Wikipedia) การประกันภัย
bank deposit - money that a person or business keeps in a bank
deposit insurance - insurance that protects the money people keep at banks (bank deposits)  

The government retreated and last week issued an emergency decree to transfer the debt liability to the central bank as well as empowering the central bank to ask commercial banks to make additional contributions in deposit insurance.

current - of the present time ปัจจุบัน
rate - the level or speed at which something happens or changes, or the amount or number of times it happens or changes in a particular period อัตรา
current rate - here: the interest rate now
The current rate of 0.4% on deposits will rise to the ceiling rate of 1%, which will go into servicing the FIDF's debt.

stake - the part of a company owned by someone
The government is trying to reduce its public debt liability further by reducing its stakes in PTT and Thai Airways to less than 50%, so the two publicly listed companies will no longer enjoy government enterprise status. 

guarantee - a promise that something will be done or will happen คำรับรอง, การประกัน (See glossary)
guarantee borrowings - state enterprises such as PTT and Thai Airways pay lower interest rates and get loans more easily because the government says they will pay if there is a problem (= guarantee)

In that event, the government would not have to guarantee their borrowings, which stand at 1 trillion baht. Public debt would fall by a further 10% of GDP, which would give the government more room to borrow further. 

entities - parts of a large organization
spinning off - moving to another place, giving to new owner
spinning off debt
spinning some debt off to various entities - taking the debt of the larger organization and giving it to smaller organizations

the government's attempts to reduce public debt by spinning some debt off to various entities will make it harder to manage the public debt as a whole

After the 1997 financial crisis, the Chuan Leekpai government combined all public debt from various entities to come under the Finance Ministry's management.

effectively - working well and producing the results that they wanted
service the public debt more effectively

The government believed it could service the public debt more effectively with all debt brought under the ministry's Public Debt Management Office (PDMO). 

spread - to gradually affect or cover a larger area or number of people แพร่หลาย, แพร่กระจาย กระจายไปทั่ว
scrutinize - check and look at carefully (looking for problems) 

It seems the Pheu Thai government wants to take us back to the situation which existed before 1997, when debt was spread over many entities, and was harder to scrutinise, and manage.

source - someone who gives information to the media แหล่งข่าว
emphasis - special importance or attention that is given to one thing in particular การเน้นย้ำ
discipline - control, obeying rules and standards of behaviour; following rules and standards of behaviour, forcing others to follow these rules ปฏิบัติตามระเบียบข้อบังคับ (See glossary)
fiscal discipline -
compromise - to risk harming or losing something important

A PDMO source said while borrowing to invest in infrastructure is necessary, this government is placing too much emphasis on borrowing, which may jeopardise fiscal discipline and compromise debt servicing.

revenues - money received by a business or government รายได้ของรัฐ
tax revenues - amounts of money that the government receives as income from collecting income taxes, VAT tax and other taxes from individuals and companies
schemes - systems for achieving some goal

Instead of finding more tax revenues to balance the increased borrowings the government is doing the opposite, reducing corporate tax and embarking on other tax other reduction policies including the First Car and First Home schemes.

value-added tax (VAT)

land  taxes - taxes paid on land owned by families and companies  
inheritance - money or objects that another person gave you after they died มรดก ทรัพย์สินที่ได้รับมรดก
inheritance taxes - taxes on the money given to children after parents die (inheritance)
financier -
a person who provides the money for some business or activity (such as an election)
support - help, by giving money, for example สนับสนุน
support base - the people who support and help the political party through votes and money contributions
the party's financiers and
support base

the government could increase value-added tax, raise taxes on tobacco and alcohol, land and inheritance taxes, but chooses not to do for fear of hurting the party's financiers and support base.

rarely - not happening often นานๆ ครั้ง, ไม่บ่อย
It is not enough to hope that tax revenues will increase automatically with economic growth, without the need to raise taxes, as this has rarely happened under any government over the past 10 years.

revenue - income from taxes or business activities รายได้
shortfall - not have enough an amount which is less than the level that was expected or needed จำนวนที่ขาดไป, ปริมาณที่ขาดไป
revenue shortfall
growth in tax collection revenue to balance the shortfall

essential - necessary and important ที่จำเป็น ที่สำคัญ
essential infrastructure

boost - to increase; to strengthen เพิ่ม; ทำให้มีกำลังมากขึ้น
competitiveness - how well a company is able to maintain or gain customers in a market; how well a business can do compared to other firms (does it have lower price or higher quality?) การแข่งขัน
boost competitiveness

the government must invest only in essential infrastructure that will boost competitiveness

If the increased borrowing is to stimulate the economy, resulting in growth in tax collection revenue to balance the shortfall, the government must invest only in essential infrastructure that will boost competitiveness, the paper argued.

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