Thailand has ample enough liquidity to handle a rise in government borrowing to fund the budget deficit and an almost US$14 billion cash handout, said Jindarat Viriyataveekul, the finance ministry’s public debt adviser.

The ministry is working closely with the Bank of Thailand to manage the state bond supply, ensuring that higher borrowing won’t affect bond offerings from the private sector, Jindarat Viriyataveekul, the ministry’s public debt advisor, said in a phone interview.

“There won’t be any crowding-out effect from our borrowing,” Jindarat said. “We mainly borrow via short-term debt instruments, which have strong demand, to minimise any impact on the local market.”

Prime Minister Srettha Thavisin’s plan to hand out 10,000 baht apiece to roughly 50 million Thai citizens aged 16 years and older has been criticised by the Bank of Thailand and some economists for its potential inflationary and fiscal impact. Funding challenges have already delayed the project several times this year, but the government recently decided to mainly fund it via the state budget.

The huge financing needs for the so-called digital wallet scheme has led the government to revise up its budget deficit for the current year and fiscal year 2025, which will start Oct 1. It has also drafted additional spending plans for it, pushing debt levels to just below their legal limit.

The Cabinet on Tuesday approved the second-revision of the public debt management plan, with new borrowings rising by 276 billion baht to 1.03 trillion baht. She said this is mainly to finance a 693 billion baht shortfall for the current fiscal year. The ministry couldn’t put the whole deficit amount in its earlier debt plan because of legal complications following the long delay of the budget bill.

The ministry already submitted a third revision of the plan to include a 122 billion baht supplementary budget under the current fiscal year to finance the digital wallet scheme. The plan is expected to be approved by the cabinet within a month, she said.

  - Bloomberg