Thailand’s central bank remains firm in its opposition to a government plan to give nearly US$14 billion in cash to almost all adult citizens to revitalise consumption activity, saying the prudent thing would be to focus on the needy.

With private consumption forecast to expand about 4% this year after a record growth of 7% last year, there’s no need to stimulate demand across the board, Bank of Thailand (BOT) Governor Sethaput Suthiwartnarueput said in an interview on Tuesday.

The so-called digital wallet programme, which currently promises 10,000 baht each in cash to 50 million Thai citizens 16 years and older, should only cover the 15 million welfare cardholders, according to Sethaput.

While Sethaput’s comments are in line with a view previously articulated by the BOT, the timing of the remarks is bound to rattle the government and deepen a long-running feud between the two over how to handle the economy. Pushing the 500-billion baht cash programme through hasn’t been exactly easy: Prime Minister Srettha Thavisin’s administration has faced numerous questions over its funding and the roll out has been delayed multiple times.

Srettha has so far sidestepped opposition to the programme and touted it as a way to lift Thailand’s economy from years of sluggish growth. The digital wallet will have a “whirlwind” impact on stimulating the economy, the premier told the parliament on Wednesday, adding the tax revenue generated from the programme will be used to boost the nation’s competitiveness, he said.

“If you want to do the scheme, it is better to do it in a targeted way and also a smaller way,” Sethaput said. “We don’t see the need to try to stimulate consumption across the board.”

Even as private consumption boomed with a recovery in tourism, vulnerable and lower income households were still reeling from the pandemic impact and in need of help, according to the governor. Limiting the digital wallet to welfare cardholders - people below a certain level of income and eligible for various state subsidies and allowances - will be “healthier” from a fiscal standpoint, Sethaput said.

The main election pledge of the ruling Pheu Thai party, the digital wallet has been dogged by controversies over the government’s shifting stance on how to finance it. After initially proposing to cover about 55 million Thais and financing it through state budget, Srettha’s cabinet decided to exclude affluent Thais and fund it through a one-off borrowing.

But potential legal challenges and warnings from the nation’s anti-graft agency prompted the government to rework the funding options. Srettha has pledged to distribute the cash in the final quarter of this year even though uncertainty remains about how it will be funded.

As the banking regulator, the BOT has advised the government to ensure that the move to borrow 172 billion baht from the Bank for Agriculture and Agricultural Cooperatives to fund the digital wallet doesn’t hurt the lender’s safety and liquidity, Sethaput said.

Sethaput said there was a fair amount of uncertainty around the digital wallet and for that reason, the BOT’s baseline forecasts for growth for this year and the next at 2.6% and 3%, respectively, don’t include impact from the programme. Thailand’s economic growth will return to its potential of 3% even without the cash handout, he said, signalling that the monetary policy path won’t be affected even if the cash handout failed to materialise.

A fresh spell of political turmoil with Srettha and Thaksin Shinawatra, the de facto leader of Pheu Thai party, facing legal cases poses significant risks to the digital wallet plan, economists at Citigroup Inc and Nomura Holdings Inc have said. Srettha is at risk of being ousted from power if he’s found guilty in an alleged ethical violation case being heard by the nation’s Constitutional Court.

  - Bloomberg