The caretaker government has decided to proceed with plans to borrow 130 billion baht to fund its controversial rice-pledging scheme.
The Election Commission (EC) has resolved it lacks the authority to approve the loan.
The caretaker cabinet on Tuesday endorsed an increase in the 2014 public debt plan from 1.316 trillion baht to 1.324 trillion baht.
The Finance Ministry has incorporated the 130-billion-baht loan into the debt plan.
Once borrowed, the money will be secured for the Bank of Agriculture and Agricultural Cooperatives (BAAC) to pay farmers for pledged rice.
Farmers in several provinces have protested and blocked roads after the caretaker government failed to keep its promise to pay money owed to them under the scheme by Jan 15.
Caretaker Deputy Prime Minister and Finance Minister Kittiratt Na-Ranong blamed the late payments on the Democrat Party's call for a review of the budget, followed by their mass resignation before the House dissolution.
The constitution bans a caretaker government from making any decisions which could financially burden the next government.
Mr Kittiratt insisted the government still has adequate money to finance the rice scheme, but said the payments require EC approval.
According to the finance minister, the 130-billion-baht loan is for the 2013-2014 pledging scheme which has been approved by cabinet since Sept 3, before the House was dissolved, under the total budget of 270 billion baht for the scheme.
Mr Kittiratt explained to the EC at Thammasat University Rangsit Campus about the need for the loan.
He said the loan is not for a new project which will obligate the next government or be prohibited by the law.
"The rice-pledging scheme is one of several projects which were previously approved by the cabinet and does not create new debt obligations for the next government," he said.
Still, the EC decided on Tuesday it does not have the authority to approve the caretaker government's loan.
EC secretary-general Puchong Nutrawong said the government has to make the call on the loan, because the rice-pledging scheme uses funds from the 2014 annual budget, supervised by the Finance Ministry.
Documents submitted by Mr Kittiratt to the EC suggested the government could proceed with the loan and would take responsibility for it if any legal complications arise.
Meanwhile, pressure is mounting on the government as rice farmers in various provinces prepare to shut down more roads and government offices after failing to receive the funds owed to them for pledged rice.
Phichit farmers intend to join forces with anti-government protests in Bangkok this week.
Farmers from five central provinces plan to shut down the Asian Highway in Phrom Buri district of Sing Buri until they receive their funds from the government.
The roadblock will take place after farmers meet the Lawyers Council of Thailand to discuss legal assistance to pursue fraud charges against the caretaker government.