New law bans damaging populist projects

New law bans damaging populist projects

A rice grower receives money from the sale of her crop to the government at a Bank of Agriculture and Agricultural Cooperatives branch in Nonthaburi province in 2014,  one of the last beneficiaries of the Yingluck government's loss-ridden scheme. (File photo)
A rice grower receives money from the sale of her crop to the government at a Bank of Agriculture and Agricultural Cooperatives branch in Nonthaburi province in 2014, one of the last beneficiaries of the Yingluck government's loss-ridden scheme. (File photo)

A new monetary and fiscal discipline act took effect on Friday with a section specifically prohibiting the government from causing long-term damage to the economy and the public through populist projects.

The Royal Gazette announcement said the law was necessary to ensure monetary and fiscal discipline and stability.

Of the 87 sections, section 9 requires the cabinet to maintain strict discipline in handling of monetary matters, fiscal policies, budgets, revenues, spending and borrowing.

The cabinet is required to carefully consider the risks and must not look to earn political popularity in a way that could cause long-term damage to the national economy and the people.

Section 10 requires the formation of a monetary and fiscal policy committee. The prime minister will chair it and the finance minister will be the vice chairman.

The other members will be the secretary-general of the National Economic and Social Development Board, the director-general of the Budget Bureau and the governor of the Bank of Thailand.

The National Legislative Assembly passed the legislation in January as the Public Debt Management Office (PDMO) had to manage hefty debt incurred from the Yingluck Shinawatra government's rice-pledging scheme.

The rice scheme was initiated by the Yingluck government to fulfil the Pheu Thai Party’s 2011 general election campaign promise.

The government bought every single grain of rice at a pledged price of 15,000-20,000 baht per tonne of paddy, 40-50% above the market rate.

It was expected the massive stockpiling would push up global prices, but the scheme backfired. 

The government had borrowed 500 billion baht from the Bank for Agriculture and Agricultural Cooperatives to fund the loss-ridden scheme and the bank's management said it would be an estimated 16 years before it was paid off. 

The Yingluck government directly borrowed 90 billion baht from the bank and secured an additional 410 billion baht through the bank issuing bonds to finance the rice policy.

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