The government plans to borrow 500 billion baht in phases to finance its digital wallet handout programme to stimulate its economy, allaying concerns that the debt proposal could widen the fiscal deficit and jeopardise the country’s credit rating, an official said on Wednesday.
The borrowing will be spread over two to three years as the vendors participating in the digital wallet plan will not be cashing out in one go, said Paopoom Rojanasakul, secretary to the finance minister and a member of the committee overseeing the programme.
While the handouts are expected to be ready by May, recipients will have six months to spend the money. Eligible shops and vendors will have two and a half years to cash out and they will be given some incentives to delay seeking reimbursement, he said.
The Public Debt Management Office will carefully select the tools to fund the handout, he added.
The Council of State, the government’s legal advisory body, is currently studying the handout scheme, and in particular the borrowing proposal, to ensure it complies with related laws.
Prime Minister Srettha Thavisin, who is also the finance minister, said last week that the government would distribute 10,000 baht each to about 50 million Thais as a one-time measure to stimulate consumption and spur economic activity, starting in May next year and lasting for six months.
The move to resort to borrowing through a special bill as opposed budget financing, as previously indicated, raised concerns about the programme saddling the country with long-term debt and fanning inflation.
The digital wallet is part of an ambitious plan to push up economic growth to about 5% annually during the Pheu Thai government’s four-year term.
It’s an ambitious target, given that GDP has expanded by an average of around 1.9%, one of the poorest performances in Southeast Asia, over the past decade.
Mr Srettha has repeatedly said the economy is in a crisis and in need of stimulus to end a cycle of low growth.
Mr Paopoom said “a big stimulus” plan was the most urgent need to accelerate economic growth from a projected 2.6% to 2.7% this year and little over 3% next year. With the budget to care for the elderly rising by 5% annually and an ageing population, only higher growth can raise the resources to support them, he said.
“Thailand is staring at a fiscal abyss with an ageing society,” he said. “We can’t go on like this. It’s like we are holding a bomb. We need higher economic growth.”
The country’s credit rating faces no immediate threat of a downgrade due to borrowing for the digital wallet as it will fuel growth and avert a surge in fiscal deficit as a ratio of GDP, Mr Paopoom said.
Ratings companies also look at many other factors in their assessment, he said.
Fitch Ratings this week affirmed Thailand’s rating at BBB+ and its stable outlook. It is also rated two notches above the lowest investment grade at S&P Global Ratings that the nation has retained since 2004.
Deputy Finance Minister Julapun Amornvivat told reporters separately on Wednesday that proposing a borrowing bill is more transparent and that the government’s majority in the House will enable the legislation to pass. The administration has no backup plan for now if it fails, he admitted.
