Public Debt Cap Raised to 70% to Aid Economic Recovery

The Thai government has announced that it will raise its public debt ceiling to allow for higher borrowing and spending in an effort to assist the economy rebuild in the wake of the pandemic.

The limit on debt-to-gross domestic product ratio, which previously sat at 60% will now be increased to 70%, enabling the government to borrow more money if necessary. The increased limit will come into effect once it has been published in the Gazette, although the exact timeframe has not yet been announced.

The new debt ratio remains in accordance with the state fiscal discipline act, while allowing the government to avoid encumbrances if it needs to borrow more money in the medium term and maintain a good debt repayment ability.

With the large impact of the Delta variant in Southeast Asia, many countries have either raised or are nearing their thresholds amidst struggling economic conditions. This higher cap enables Thailand to meet financing requirements for the next fiscal year, including following through with next year’s plan to borrow THB 2.3 trillion to fund the budget deficit, COVID relief spending and refinancing of existing debt.

Even with this raised threshold it is likely that the government will not rush into borrowing more money to fund a COVID-19 stimulus, as there is still money left over from previous authorized borrowings. Further, the government is likely to want some breathing room to assess any risks that may arise and calculate where funding will be needed in the post-vaccination period.

Thai entities continue to call for additional increases, with the bank of Thailand seeking an additional THB one trillion to support pandemic recovery and business chambers calling for a stimulus of THB 1.5 trillion to assist in the revival of tourism and trade reliant industries.

The Finance Ministry predicts that Thailand’s debt-to-GDP ratio will hit 58.9% at the end of September 2021, growing steadily to 63.8% by the end of 2022. This figure stood at 55.6% (THB 8.9 trillion) at the end of July 2021.

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