The government should not have a problem repaying public debt, even if it borrows more in the future, says Finance Minister Arkhom Termpittayapaisith.
The State Monetary and Fiscal Policy Committee's decision on Monday to raise the ceiling of the public debt-to-GDP ratio from 60% to 70% will allow further borrowing to rehabilitate an economy battered by the prolonged pandemic, he said.
The committee is made up of representatives from the Finance Ministry, Bank of Thailand, the National Economic and Social Development Council and the Budget Bureau.
Mr Arkhom said raising the ceiling gives the government more room to borrow more than 1.2 trillion baht.
However, the government will consider additional borrowing only when necessary, he said. The move does not mean the government intends to borrow the full amount.
The minister said the country has strong debt repayment capability. The ratio of net public debt to the government's estimated net annual revenue is 31.8%, lower than the ceiling of 35%.
Moreover, the proportion of foreign currency-denominated public debt is as low as 1.67%, compared with the ceiling of 10%.
Mr Arkhom said the law governing monetary and fiscal discipline obliges the Budget Bureau to allocate 2.5-4% of annual expenditure to repaying the debt principal.
The bureau set aside 100 billion baht in fiscal 2022 for the repayment of principal and another 200 billion for interest.
He said the government is predicted to spend 140 billion baht this year of the 500 billion in borrowing under the second emergency loan decree.
Some 120 billion baht has already been borrowed.
The remaining 360 billion baht will be spent in fiscal 2022, which begins next month, said Mr Arkhom.
The government issued its first emergency loan decree last year to authorise borrowing of 1 trillion baht to fund its stimulus schemes in response to the pandemic.
A second decree was issued this year to allow the government to borrow an additional 500 billion baht.
He said borrowing of the first 1 trillion baht was expected to send the public debt-to-GDP ratio to 59% this month from 55.6% in July.
If the government borrows the remaining 300 billion baht next year as part of the 500-billion-baht decree, public debt could exceed the 60% ceiling in 2022, said Mr Arkhom.
The Bank of Thailand believes it is necessary to raise the ceiling of the public debt-to-GDP ratio to provide more fiscal space for the government to better manage the pandemic and improve the economy, said Mathee Supapongse, the central bank's deputy governor for monetary stability.
He said the government should focus on budget spending for stimulus schemes to help the economy, returning to reducing the public debt ratio to below 60% at a later date.