The government's rice pledging scheme and other populist policies could lead to Thailand's economic collapse, former finance minister Thirachai Phuvanatnaranubala said.
The impact of the policy may be more severe than expected because the country's public debt does not take account of future liabilities, he said.
Mr Thirachai, the first finance minister in the Yingluck Shinawatra administration, posted the comment on his Facebook page calling on the Finance Ministry and the Bank of Thailand to take another look at the policy.
The government has earmarked 400 billion baht for the rice pledging scheme in the 2011/2012 crop year.
Mr Thirachai said the rice pledging scheme has offered benefits to various groups of people, not just the underprivileged.
Whether this scheme and other populist policies like it would harm the economy depends on the source of funding used.
Public debt levels would increase if the source of funding does not come from taxes. In his view, the rice pledging scheme would worsen the country's public debt. "Theoretically, rising public debts may lead to the country's bankruptcy, similar to what has happened in Greece," he said.
The government has insisted the country is able to borrow to finance the rice pledging scheme and other development projects, as public debt is only around 40% of gross domestic product.
Still, Mr Thirachai, who is an accounting expert, said the public debt figure released by the Finance Ministry is not realistic because the ministry calculates the figure on a cash basis.
It means debt burdens from the projects, including future debts, would not be included in the public debt until the projects' accounts are closed.
"As a result, Thailand's public debt figure is not brought up to date and does not reflect realistic financial burdens overall," he wrote.
He suggested the Finance Ministry include in the public debt figure the total financing burden incurred by the state and state banks as they borrow to finance the projects, and update the information quarterly.
Mr Thirachai also warned that the government's populist projects would affect private investment.
He said that the projects, particularly the rice pledging scheme, would boost domestic consumption only in particular years, which would lead to an increase in inflation.
Rising inflation will act as a brake on possible interest rate cuts, and deter private investment.
"The Finance Ministry and the Bank of Thailand should assess the affect of such populist policies and find way to reduce the impact," he said.
Democrat spokesman Chavanond Intarakomalyasut said yesterday the government could lose at least 176 billion baht of the 2011/2012 rice pledging scheme budget and the project was likely to help only one in every four farmers.