Thailand to fund US$14 billion cash handout through state budget

THAILAND will fund a US$14 billion cash handout programme to stimulate the economy through a combination of state budget and assistance from a state bank, shelving an earlier plan to resort to off-the-book borrowing. 

The financing details of the so-called digital wallet programme – which will see 50 million adult Thais each getting 10,000 baht (S$370) – were approved by a panel headed by Prime Minister Srettha Thavisin in Bangkok on Wednesday (Apr 10). The cash stimulus, equivalent to about 2.9 per cent of gross domestic product, is set to be implemented in the fourth quarter. 

Under the financing plan, a total of 327.7 billion baht will come from the budgets for this fiscal year and next, Lavaron Sangsnit, permanent secretary at the Finance Ministry, said. The remaining 172.3 billion baht will be carved out of the budget meant for the state-owned Bank for Agriculture and Agricultural Cooperatives.  

The stimulus, delayed by several months over differences on how it will be funded, is touted by Srettha as key to lifting growth in South-east Asia’s second-large economy that’s lagged the pace of its peers in the region. Some central bankers and opposition parties have opposed the payout, arguing that it may fan inflation and widen public debt. The money is to be spent on goods and services within a specific time-frame in a designated area and is the flagship pre-election promise of Pheu Thai Party that leads the current coalition government.

The stimulus measures, including the digital wallet, are “extremely necessary” as Thai economy is coming off a decade of average sub-2 per cent growth and faced other problems including uneven economic recovery post the pandemic and high interest rates, Srettha has said.

Srettha, who also doubles as finance minister, is pushing for looser fiscal policy settings to lift the nation’s $500 billion economy from a decade of average sub-2 per cent growth. Last week, the cabinet approved a plan to widen the budget deficit for next year by about US$4.2 billion and the parliament may hold a special session in the next two months to accelerate approvals for the spending plans.

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On Tuesday, the cabinet also announced a raft of incentives and tax breaks for the property sector that officials say will further aid the economy. 

The stimulus measures being funded through debt risks a setback for its fiscal consolidation efforts though it’s likely to accelerate growth in the near-term, ratings companies have warned. The baht has gone from the best-performing Asian currency in the fourth quarter last year to the biggest loser this year as investors continue to pull funds out of the nation’s equities and bonds. BLOOMBERG