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The Srettha administration’s 10,000 baht digital wallet policy is currently being scrutinized by the Office of the Council of State after the main opposition Move Forward Party (MFP) argued that taking out a loan worth 500 billion baht to fund the handout policy might be against the charter and the State Financial and Fiscal Discipline Act. Both the charter and the fiscal discipline law state that such a large loan can only be taken out in times of crisis.
Meanwhile, representatives of the government, led by the Pheu Thai Party, including Prime Minister Srettha Thavisin himself, have been arguing with the MFP, mostly with deputy leader Sirikanya Tansakul, over the state of the Thai economy at the moment.
The government claims that the economy is in crisis, with domestic consumption hampered by impacts from the COVID-19 pandemic and the Ukraine-Russia war, and it needs to be stimulated by the 10,000 baht digital wallet policy.
In contrast, the MFP contends that there is no economic crisis, citing slow growth due to a drop in global demand, leading to a slump in exports while domestic consumption is still expanding. Therefore, according to the MFP, the economy and domestic consumption do not need to be stimulated by a huge cash injection.
Despite criticisms and the MFP’s opposition, the government appears likely to continue with the policy, as it was one of Pheu Thai’s main election pledges, and they believe it will stimulate the economy. Now, it is up to the Office of the Council of State to check its legality and then draft the law before presenting it to Parliament.
With this information in mind, we have sat down with Deputy Finance Minister Julapun Amornvivat, who has been spearheading the policy, to find out how the policy got to this point and how it will continue going forward.
Thai Enquirer: Please tell us how the government went from the promise not to take out any loans for the policy to the decision to take out a 500 billion baht loan to fund it.
Julapun: The subcommittee set up to implement the policy looked into many options, including the use of continuous budgeting and the implementation of Section 28 of the State Financial and Fiscal Discipline Act to allocate budgets from state financial institutions (SFIs) such as the Government Savings Bank.
However, the 2024 fiscal budget allocation has been delayed by four months, there are fiscal risks to these options, and SFIs have informed us that using their fiscal budgets to fund the policy would be against their regulations.
Therefore, the implementation of the policy, expected in February, has been delayed, and we were looking at the option to allocate funding from leftover budgets from various agencies and delaying some projects. We have found around 200 billion baht from the 2024 and 2025 fiscal budgets.
Nevertheless, there is still a limitation where such continuous budgeting could be against the Bank of Thailand’s Currency Act, which states that the government cannot use a budget from the 2025 fiscal budget since it has yet to be approved by Parliament.
Faced with these limitations, we were considering splitting the policy into two fiscal years, but that would go against the aim for the policy to stimulate the economy with a significant cash injection in a short period. We were facing this reality until Prime Minister Srettha Thavisin met with Bank of Thailand Governor Sethaput Suthiwartnarueput. After the meeting, the prime minister informed the subcommittee that there is another option, which is to take out the 500 billion baht loan in one go.
The loan is a viable option, and there is logic to it – allowing the people to spend money instead of the government spending it. We believe that people would be more efficient in spending the money to stimulate the economy. With this option, the policy will be able to attain the stimulation impact. Still, we are also left with two more options: initiating either an emergency decree for the loan or a loan bill. We went with the latter option to allow Parliament to debate it. This is the most transparent and straightforward option.
Thai Enquirer: Since the Pao Tang application will now be used to distribute the money, will the government continue with the development of a new super application to provide state services?
Julapun: The government initially wanted to develop a transaction application that belongs to the state. Still, with the recommendation that the existing Pao Tang application can be used to distribute the money effectively, we decided to go with Pao Tang. It has proven to be effective in implementing government measures in the past and is cheaper.
We do not care about the criticism that this is an existing application developed by the previous government. We are not hung up on that.
Nevertheless, the government is still looking to develop a new national super application backed by blockchain technology to improve cybersecurity for online public services, enhance transparency in budget spending, provide better targeting for government measures, enhance digital literacy, and promote wireless transactions as well.
Thai Enquirer: Will there be added measures or incentives to increase the possibility that SMEs, such as convenience stores, would use the money to invest to achieve the level of fiscal multiplier that the government expects from the policy?
Julapun: Yes, there will be incentives for SMEs to invest in raw materials and production means instead of cashing out because the policy aims to stimulate the economy.
We are still developing these added measures to enhance the policy’s fiscal multiplier effect, such as if SMEs decide to group together as cooperatives and use their collective money from the policy to invest. We will announce them once the details of these measures have been finalized.
Thai Enquirer: Will there be added measures to incentivize SMEs to buy raw materials and means of production from fellow SMEs instead of mainly buying from large corporate businesses, addressing concerns that the ultimate beneficiaries of this policy will be large corporations like the Charoen Pokphand Group?
Julapun: Yes, there is no denying that there is a possibility that the policy might benefit large corporations because of Thailand’s economic structure, and I am afraid that it will happen as well. However, the implementation of the policy will show how to fix this problem since it will allow us to see the flow of the money and where they will end up.
Once we see this, we can use what we learn to develop mechanisms to improve similar policies in the future. We are thinking of added measures to incentivize SMEs to buy raw materials and means of production from other SMEs, and we still have time to develop these details. This includes a limitation that the first round of distribution can only be used to buy from SMEs.
Still, that would also limit the options of stores that people can buy from, which would pose more problems and create an exclusion that we do not want to see. Therefore, we are looking at other possible measures to provide more benefits to SMEs at the moment.
Thai Enquirer: Can you further explain the claim that the policy will help reduce public debt instead of increasing it, and are you not concerned about a possible rise in inflation at all? What if there is another global inflation shock from the Israel-Hamas war?
Julapun: If we do not implement the policy, the economy will continue growing by an average of 2%, and the budget deficit will remain around 700 billion baht per fiscal year. The public debt to GDP will keep growing to reach the ceiling of 70%. However, if we implement the policy, it will allow the GDP to grow by an average of 5% per year for the next 4 years, and the public debt to GDP will not reach 70%.
Regarding inflation, the government is not that concerned because the Bank of Thailand has been effectively managing inflation, and Thailand has not been troubled by inflation for over the past two decades until the impacts from the Ukraine-Russia war, which was an issue on the supply side, not the demand side.
Inflation is not that scary if there is economic expansion. On the other hand, low economic growth is more troubling because our economic competitors are already moving faster than us, and there is a need to boost economic growth to provide prosperity for the Thai people.
Thai Enquirer: So, is there a backup plan to stimulate the economy in case the Office of the Council of State or the Constitutional Court drops the loan bill?
Julapun: I cannot comment on that, as that would be up to the prime minister to comment. Still, I can say that, on my part, there is no backup plan for the policy because my mission is to make sure that the policy happens by making compromises if needed and answering any questions that people or independent institutions might have for the policy.