Cabinet approves B1.34 tn borrowing in 2022 fiscal year

Cabinet approves B1.34 tn borrowing in 2022 fiscal year

Bank of Thailand plans debt consolidation measures to help reduce interest rates on consumer loans

(Bangkok Post file photo)
(Bangkok Post file photo)

The Cabinet on Tuesday approved new borrowing of 1.34 trillion baht in the 2022 fiscal year starting in October, government officials said.

The borrowing is part of a wider debt management plan in the fiscal year, which also includes existing debt of 1.5 trillion baht and 339 billion baht debt management, deputy government spokeswoman Rachada Dhnadirek told a briefing.

With the ongoing outbreak, the government has a need to use fiscal policy to revive and stimulate the economy, Patricia Mongkhonvanit, head of the Finance Ministry's Public Debt Management Office, said in a statement. 

The debt plan took into account central bank monetary policy and liquidity in the system, she said.

The new borrowing will also be used to finance a budget deficit of 700 billion baht in the fiscal year, she added.

Under the debt plan, the country's public debt is expected to reach a ratio of 62.69% of gross domestic product (GDP) at the end of the 2022 fiscal year to Sept 30, the officials said. As of July, the debt-to-GDP ratio was at 55.59%.

Earlier this month, the government approved lifting its public debt ceiling to 70% of GDP from 60% for more fiscal flexibility. 

Meanwhile, the Bank of Thailand (BoT) said on Tuesday it planned to introduce debt consolidation measures to help reduce interest rates on consumer loans for retail debtors, as the country suffers its most protracted coronavirus outbreak so far.

The move is viewed as more useful than cutting the rate ceiling of those loans, at a time of high credit risk, as it would push debtors with bad credit to borrow outside the financial system, said Oramone Chantapant, deputy director at the BoT.

"What will help debtors a lot is debt consolidation, which will be introduced in the middle of next month and we will also increase incentives," she told a briefing.

However, cutting the rate ceiling remains a policy option, she added.

In June, the government asked the BoT to review interest rates for personal loans and credit cards to ease people's interest burden.

The BoT has said it would focus on financial support measures to assist debtors as the central bank governor recently said interest rates were a blunt tool.

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