Thailand cleared to borrow $14.29bn

Thailand has received approval to borrow funds for its controversial 500 billion baht ($14.29 billion) digital stimulus program, providing a boost to the government’s efforts to stimulate the sluggish economy. Deputy Finance Minister Julapun Amornvivat announced on Monday that the Office of the Council of State, an independent legal advisory panel, found no impediment to borrowing from the state budget for the initiative.

The digital handout scheme, a key policy of the ruling Pheu Thai party, aims to provide 10,000 baht to 50 million Thais to spend in their local communities. The government is focusing on stimulating economic growth, primarily through stimulus measures and consumer spending, as Thailand lags behind regional peers with a growth forecast of around 2.4% last year, falling short of the 2022 target.

Critics, including economists and some former central bank governors, have raised concerns about the “digital wallet” plan, suggesting it could be fiscally irresponsible and contribute to inflation. Seeking legal clarity, the government sought advice from the Council of State last year, and the recent approval allows the government to proceed with its borrowing plan.

Deputy Finance Minister Julapun assured reporters that the government would manage the borrowing carefully and emphasised the program’s potential positive impact on the economy. Despite criticisms, the government plans to roll out the scheme in May.

In a related development, Prime Minister Srettha Thavisin, who also serves as finance minister, urged the central bank on Monday to consider lowering interest rates due to very low inflation. He expressed his disagreement with the current policy stance of maintaining a policy rate of 2.50%, set at a decade high since November, and indicated his intention to discuss the matter with the central bank governor.

Inflation remains a concern, with December’s headline inflation registering at -0.83%, marking the eighth consecutive month outside the central bank’s target range of 1% to 3%. The central bank is set to review its policy on February 7, having raised rates by 200 basis points since August 2022 to address inflation concerns.