Economists have voiced concern over the Pheu Thai Party's planned 10,000-baht digital handout policy, predicting it could affect the value of the baht and deteriorate monetary and fiscal discipline.
Under the scheme, citizens age 16 and older are given a digital wallet with 10,000 baht to be spent within six months at shops within a four-kilometre radius of where they live.
The budget required to fund the scheme is estimated at 500 billion baht, according to the party. Pheu Thai said the scheme is a one-time giveaway aimed at spurring economic activity and driving GDP growth to 5%.
Economists have cautioned against stimulus spending as it could fuel inflation and lead to a hike in the prices of consumer goods.
Under the scheme, citizens age 16 and older will be given a digital wallet with 10,000 baht to be spent within six months at shops within a 4-kilometre radius of where they live.
Pipat Luengnaruemitchai, chief economist of Kiatnakin Phatra Securities Research, posted an article on Facebook titled "The Price of Money" that analysed the handout policy, claiming it may affect the value of the baht in the future.
Mr Pipat wrote "money has a price, and there are four features to that price".
First, the interest rate is the current price of money compared with its future value. The central bank plays an important role in determining that price, but cannot completely control it as there are many types of interest rates and different durations. The price is mainly determined by the market, according to the paper.
Second, the exchange rate is the price of a currency issued by a central bank compared with other currencies. It is subject to changing factors such as supply and demand, investment sentiment, and different spreads leading to currency arbitrage, noted the paper.
Third, inflation is the price of money compared with the quantity of goods and services that can be purchased, which depends on many factors including the money supply, commodity prices and the supply and demand of goods.
Finally, par is the price of money in different forms. For example, money in the form of banknotes, coins, bank deposits and digital wallets are assumed to have the same value, with variations subject to different terms and conditions, limitations and sentiment.
Given the different prices of money, particularly the par value, each country has to establish a central bank as a monopoly issuing money or a regulator to maintain economic stability.
The Pheu Thai-led government said it wants to create a new digital wallet for this scheme, eschewing the existing Paotang mobile app.
This move caused a stir among analysts and the public, particularly regarding the problem of value homogeneity, lack of exchange mechanism and the absence of a 100% state guarantee.
Given different terms and conditions for its usage, people will attach different values and the state may be unable to control them, said Mr Pipat, which would decrease the value of the baht. As a result, people may stop using digital wallets, which could have a negative effect on the country's financial security, he said.
In addition, the issuance of money equivalent without incurring debt, fiscal deficit or a state burden could have an impact on monetary and fiscal discipline, said Mr Pipat.
