Like other countries, Thailand is fighting a war against Covid-19. For the government, it cannot afford to lose this war as it must ensure safety to public health, buffer the outbreak's impact on the economy and help affected people who have lost jobs and incomes.
The good news is that the Finance Ministry has insisted the country has sufficient monetary resources to spend to survive the economic impact of this crisis.
While doctors, nurses and other health workers battle the outbreak on the front lines, the need to tackle the impact of the health crisis on the economy is equally critical in order to prevent its deterioration from reaching a stage where it can no longer be fixed. Healing economic woes, however, needs monetary resources.
The questions remaining are: How much money does the government have in its pocket and how much borrowing can it seek?
Fortunately, the country's current fiscal standing is strong enough -- thanks to former and current state officials at the Finance Ministry who have helped establish and maintain sound fiscal discipline, even during periods when governments spent lavishly to finance their populist policies.
Given the current strong financial standing, government borrowing -- as a means to restore the economy in the long run once the Covid-19 outbreak is contained -- could reach hundreds of billions of baht without compromising the country's fiscal stability.
Such a vast sum of borrowing, in fact, could help boost investors' confidence that the Thai economy will soon recover.
What is more important is the design of economic relief measures, which must address the root causes of the problems, target the need to restore the economy and ensure efficient spending.
The Thai economy has been severely hit by the Covid-19 outbreak. The Bank of Thailand has estimated a 5.3% contraction for this year -- the worst since the 10% contraction that the country suffered in the post-Tom Yum Kung crisis period.
At the present, the government's priority is to contain the outbreak and provide treatment for Covid-19 patients. In addition to its immediate relief measures implemented to help low-income earners shoulder the economic impact, the government will have to give a helping hand to other groups of people, such as the middle class, once the economic effects escalate.
Thailand's fiscal status has been maintained below "the dangerous threshold". As of January, the public debt-to-GDP ratio was 41.27%, well below the ceiling of 60% set by the government's fiscal sustainability framework. That means the government still has room -- at about 19% of GDP -- to borrow and increase public debt to boost economic growth.
Given the size of Thailand's GDP at 16.9 trillion baht, the government's borrowing should be large enough to tackle this crisis.
Officials at the Finance Ministry have played a key role in strengthening the financial discipline framework. This has helped stabilise the country's fiscal status. That means even though several populist policies of governments increased public debt, the fiscal status is still manageable.
The Fiscal Policy Office pushed for the Fiscal Responsibility Act, which was passed in 2018. The new law constitutes a comprehensive fiscal management policy including a ceiling at which the government can borrow from state-run financial institutes. This is vital given that many of the government's populist policies are usually funded by borrowing from the Government Savings Bank and the Bank for Argriculture and Agricultural Cooperatives.
At present, the government has used a 50-billion-baht sum from the central budget, which is reserved for emergencies, to finance its cash handout scheme for informal workers affected by the outbreak, each of whom receives a total sum of 15,000 baht over three months. Should it need to spend in excess of the 2020 fiscal year budget, the government can still issue a loan bill as a source of its financing to quell the outbreak and restore the economy.
Under the law, the government can seek additional loans of 100 billion to 200 billion baht in excess of the annual fiscal budget. Such an amount, however, is still lower than 2% of GDP and thus will not affect fiscal stability.
On the other hand, if public debt were much higher than the current level or exceeded the 60% limit, and if the government decided to borrow vast amounts then this could lower investors' confidence, and it would have found itself in a much more difficult situation.