The country's household debt is a critical issue that must be addressed, and the idea of a debt buyback is undeniably appealing. However, authorities must approach the proposal with extreme caution. The debt relief measure gained attention after former prime minister Thaksin Shinawatra raised the idea at a mayoral election rally in Phitsanulok last week.
Thaksin, father of the current PM Paetongtarn Shinawatra and widely considered the de facto leader of the ruling Pheu Thai Party, acknowledged the severity of the household debt crisis. As the problem snowballs, the growing debt burden has become a major obstacle to economic growth.
How worrisome is the household debt situation? The data paints a grim picture. According to the Bank of Thailand, 25.5 million citizens -- more than one-third of the population -- are trapped in a cycle of debt, underscoring the urgent need for intervention. The figures are alarming: the average debt per person exceeds 500,000 baht, with a staggering 67% of household debt classified as non-performing, primarily stemming from personal loans and credit cards.
The crisis is even more pronounced when viewed through generational and demographic lenses. A particularly troubling trend emerges among younger Thais, with 57% of individuals aged 25 to 29 -- typically first-jobbers -- already trapped in debt, according to the National Credit Bureau (NCB).
Even more distressing is the situation among retirees. One-third of this demographic -- who have lower incomes but higher expenses -- are still struggling with debt, and over 10% hold non-performing loans (NPLs). By the end of last year, Thailand's total household debt had soared to 16.3 trillion baht, equivalent to 89% of GDP. These figures are not just statistics; they represent a significant drag on both individual financial security and broader economic development.
The debt buyback idea floated by Thaksin hinges on two conditions: no government funding would be required, with private companies allowed to buy back debts, and debtors would not have to pay the full amount owed to new creditors, allowing them to clear their names from the credit bureau's blacklist more quickly.
PM Paetongtarn said she would discuss the idea with her advisers and ministers, while Finance Minister Pichai Chunhavajira noted the debt buyback is just one option. The ministry would gather feedback before making any decisions.
While the proposal has brought the household debt crisis into the public spotlight, it has also been met with scepticism -- and rightly so. Financial analysts question the private sector's role and how it would secure funding for such a massive debt buyback. And what types of debt would be covered? If the plan targets small-scale debtors, how would it differ from the government's existing "You Fight, We Help" debt relief programme, which attracted fewer participants than expected?
While debt relief is necessary, the scheme must not encourage irresponsible borrowing or create expectations of future bailouts, which could ultimately perpetuate a cycle of indebtedness.
Thailand has extensive experience with debt restructuring from past financial crises -- lessons authorities must heed as they navigate the current situation. While debt restructuring can provide immediate relief, sustainable solutions lie in genuine economic growth, which can boost household incomes, improve access to credit, and enhance borrowers' ability to repay debts.