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Thailand mulls up to US$3.4 bil extra budget to finance cash handout plan

Tan KW
Publish date: Tue, 21 May 2024, 09:51 PM
Tan KW
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Thailand is working on a supplementary budget that seeks to lift state spending by as much as 122 billion baht as Prime Minister Srettha Thavisin presses ahead with a plan to stimulate the nation’s economy through a cash handout.

The additional money will finance the government’s so-called digital wallet programme which will see about 50 million Thais receiving 10,000 baht each in the fourth quarter, according to Finance Minister Pichai Chunhavajira. The details of the extra spending will be submitted to the cabinet on May 28 once relevant agencies finalise them, he told reporters on Tuesday.

Srettha’s administration has pledged to shore up Southeast Asia’s second-largest economy through the controversial cash handout that’s been criticised by the central bank and opposition as inflationary and a risk to fiscal consolidation. Pichai said the stimulus will help bolster growth after first-quarter GDP growth of 1.5% lagged behind the performance of its regional peers.

“We avoided a technical recession in the first quarter but our economic growth for the quarter and the whole year are lower than neighbouring countries,” Pichai said. “This underlines the need for the government to find ways to boost growth.”

The government opted to raise the budget outlay for the cash stimulus instead of reworking existing spending proposals to avert delays in public expenditures, Pichai said.

The cabinet had previously approved a plan to fund the 500 billion baht handout through budgetary allocations and a loan from the state-owned Bank for Agriculture and Agricultural Cooperatives. It has also green-lighted a wider fiscal deficit for the next fiscal year to partially finance the payout.

The new spending proposal will be on top of the 3.48 trillion baht budget for the fiscal year that began on Oct 1 and will widen the 693 billion baht budget deficit, or 3.6% of gross domestic product, according to Deputy Finance Minister Paopoom Rojanaskul. The supplementary budget is “the best way” to mobilise the 175 billion baht needed from the current budget for the so-called digital wallet, he said.

The yield on benchmark 10-year government bonds rose four basis points to 2.787%, the highest level since Dec 13.

Paopoom said the extra budget is unlikely to hurt the domestic bond market as the government will spread out borrowing over a few years as the shops and vendors participating in the digital wallet plan will not be cashing out in one go.

Deputy Finance Minister Julapun Amornvivat said additional budgetary spending will mainly be funded via a wider deficit and extra revenue collection.

 


  - Bloomberg

 

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