Budget set to repay principal
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Budget set to repay principal

Government debt at 3%, highest ever

The government has set aside a budget to repay principal government debt at 3% of its total expenditure budget, the highest ratio ever, to maintain fiscal 2021 strength, says the Public Debt Management Office (PDMO).

The ratio is a level that the government must reach to maintain its fiscal strength, said Patricia Mongkhonvanit, the PDMO's director-general.

For fiscal 2020, ending on Sept 30, the government allocated a budget to repay the principal amount of government debt at 2.68% of total expenditure.

After a law on budget transfers was enacted to manage the crisis, the ratio for repaying principal government debt was reduced to 1.68%, Mrs Patricia said.

According to the fiscal discipline framework set by a committee on state fiscal and finance policies in accordance with the State Financial and Fiscal Discipline Act of 2018, the government's principal debt repayment is stipulated at 2.5-3.5%.

Although the government issued a 1-trillion-baht loan decree and additional borrowing of 214 billion baht to compensate for the budget deficit, the latter intended as a credit line in case public expenses exceed revenue and to restore economic growth, the government's fiscal position remains stable, she said.

According to international standards, the government's interest burden should not exceed 10%, she said.

At present, the government's interest burden is 5-6%, much lower than the limit of the international standard, Mrs Patricia said.

For many countries, the definition of public debt does not take into account state-owned enterprise (SOE) debt such as SOEs listed on stock exchanges, she said. This is because the SOEs have the capability to service their own debt burdens.

If SOE debt backed by government guarantee were not taken into account, Thailand's ratio of public debt to GDP would be 35-36% instead of the existing 45.83%.

If the government borrows the full loan amount of 214 billion baht, this would increase the ratio of public debt to GDP to 57.8%, Mrs Patricia said.

Whether the ratio will exceed the 60% ceiling rate will depend on whether the government engages in additional borrowing, such as issuing loan decrees, she said.

For the 1-trillion-baht loan, the PDMO has issued 33% of the total.

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