May 31, 2024
BANGKOK – Thailand’s public debt is dangerously close to breaching a ceiling that would jeopardise the country’s fiscal stability, an economics expert warned on Thursday.
Nonarit Bisonyabut, a research fellow at Thailand Development Research Institute (TDRI), expressed alarm over the latest projection of 68.9% public debt-to-GDP by 2027.
“This situation is very worrying because the public debt ceiling is set by law at 70%,” he said.
He explained that the space under the public debt ceiling affects the country’s credit rating on which the government depends for loans and for tackling economic crises.
“Although the ceiling could be raised, high public debt means we have to budget more for interest payments on debts instead of using the money to fund the country’s development,” Nonarit said.
Public debt soared from 41-42% in 2019 to 62.4% in 2023, driven up by government relief measures during the pandemic.
Economists say the Pheu Thai-led government’s plan to borrow 500 billion baht to finance its controversial digital wallet scheme will help push public debt close to the ceiling.
While governments usually seek to reduce public debt to boost fiscal stability, the current administration is focusing on short-term stimulus measures that require debt rollovers, Nonarit said.
“This will worsen fiscal stability,” he commented, explaining that the government will have to pay higher interest rates to roll over the loans for short-term economic stimulus.
He urged the government to review its short-term stimulus measures and instead focus on a long-term plan to restructure the economy. This should involve cuts in public spending, tax reform, and a reducing the public debt to GDP ratio to 60%, he said.