May 30, 2023
BANGKOK – The two parties who won the most seats in the recent general election, Move Forward and Pheu Thai, have announced their plans to tackle rising household debt, which is considered a significant structural economic problem in Thailand and currently stands at a record high of 15.09 trillion baht, according to the National Economic and Social Development Council (NESDC).
Move Forward Party’s debt resolution policy is to declare war on informal debt (unlicensed lenders) by allocating a budget of 10 billion baht for debt restructuring (refinancing). The government will intervene as a host in resolving the non-systemic debt problem.
The implementation of these measures will involve the Office of the Prime Minister, the National Police Bureau, the Office of the Attorney General, the Revenue Department, and the Department of Special Investigation (DSI) in negotiating with the creditors to restructure the debt in order to assist debtors to pay off their debts.
For occupational groups with high debt problems, such as government teachers, there will be a new debt restructuring plan that consolidates debts from financial institutions and teachers’ cooperatives into a single debt. Individual teachers’ debt information will be disclosed to commercial banks to assess the risk of granting loans beyond the teachers’ repayment capacity. A ceiling will be set on salary deductions, not exceeding 70% of monthly income, and loan interest rates will be reduced if teachers have a good repayment history.
As for debtors who owe money to state financial institutions, measures will be implemented to assist those with a good repayment history. If they have made timely payments for more than 12 installments, their interest rates will be reduced by 10%. The government will provide budgetary support to compensate for the interest rate reduction.
Pheu Thai, meanwhile, aims to address debt problems including agricultural debts, by suspending debt repayment. Since 90% of Thai farmers are in debt, with an average debt of approximately 430,000 baht per household, the party would implement a debt moratorium. Under this policy, farmers would will be granted a 3-year grace period on both principal and interest, along with agricultural restructuring measures to increase their income. They will be able to repay their debts once the debt moratorium measures expire.
SMEs, which have 2.3 million accounts and a debt value of 200 billion baht, or debt classified as non-performing loans (NPLs), would be provided with a 1-year debt moratorium in parallel with targeted debt restructuring according to the needs of the private sector. This would apply to all SMEs that were previously strong, but were affected by the COVID-19 crisis,
For those with informal debts and identified as being financially excluded from the formal credit system and lacking collateral, thought to number around 1.4 million people, Pheu Thai proposes bringing informal debts into the formal system through competition with informal lenders, offering lower and safer interest rates and government guarantees through support for so-called Pico Finance.
Pheu Thai also wants to increase the debt in the off-budget system by allocating a budget for loan guarantees to allow the government to partially assume the risk of the public in accessing credit within the system. Both mechanisms will work together to stop the cycle of off-budget debts and lead to sustainable debt solutions.