Bank of Thailand says increased public debt ceiling to help economy

Bank of Thailand says increased public debt ceiling to help economy

FILE PHOTO: Bank of Thailand Deputy Governor Mathee Supapongse in 2015 (Photo supplied)
FILE PHOTO: Bank of Thailand Deputy Governor Mathee Supapongse in 2015 (Photo supplied)

Thailand's increased public debt ceiling will give flexibility in policy implementation to cope with the coronavirus and support the economy as fiscal measures are still necessary, the central bank said on Tuesday.

The government on Monday raised the debt ceiling to 70% of gross domestic product (GDP) from 60%, allowing it to raise more funds to help a flagging economy with the key tourism sector still struggling.

The risk to fiscal stability is low as the new debt ceiling is not too high and most of the public debt is domestic with borrowing costs, Deputy Governor Mathee Supapongse said in a statement.

"Increasing the debt ceiling doesn't mean the government will have to borrow to hit the ceiling but to increase the flexibility in implementing measures," he said.

"Fiscal measures still need to play a key role in supporting people's reduced income and help the economy recover quickly".

The government's existing plan is to borrow 500 billion baht to support the recovery, so the debt-to-GDP ratio is already expected to be higher than 60% next year versus 55.6% currently, he said.

However, there is sufficient liquidity in the system to support future government bond issuance and the central bank will work closely with the finance ministry for smooth and effective fundraising, Mr Mathee said.

The Bank of Thailand forecast the economy would grow 0.7% this year, after a 6.1% contraction last year. 

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