Passing The Buck To Satisfy Its Own Political Agenda: Thai Opinion

[webfact]

EDITORIAL

Passing the buck to satisfy its own political agenda

The Nation

The government wants the central bank to take on responsibility for public debt so that risky populist schemes can go ahead, possibly at great expense to the public and country

The government's decision to pass responsibility for the Bt1.14 trillion in public debt from the 1997 Asian financial crisis to the Bank of Thailand should be based on how to manage the debt burden effectively, not simply to pass the buck to another agency.

Nevertheless, it seems that the decision to pass on the debt responsibility from the Finance Ministry to the central bank is related to the government's plan to borrow more public money to finance its populist policies and its flood-relief programmes. The government does not seem to have a better plan to improve its public debt management.

At present the Finance Ministry has to shoulder the 1997 debt repayment to the tune of Bt60 billion per year. As a result, the ministry does not have much flexibility in financing its investment programmes.

The Cabinet on Tuesday approved a Bt350 billion fund for investment in water-resources management. It will also establish an insurance fund pool of Bt50 billion to reassure foreign insurers of businesses. This new borrowing of about Bt400 billion will add to the already huge existing public debt. This will certainly put more pressure on the Finance Ministry because it will force the ministry to limit any unnecessary expenditure to ensure that the public debt level is maintained at a manageable level.

Deputy Prime Minister Kittiratt Na-Ranong said on Tuesday the Cabinet proposed that the central bank take on the Bt1.14 trillion in debts owed by the Financial Institutions Development Fund (FIDF), a financial arm of the central bank itself, after the government had managed this debt for 14 years.

Public debt currently stands at Bt4 trillion, or about 40 per cent of the gross domestic product (GDP). This includes the debts of the FIDF, which if transferred to the BOT would lower the public debt level to 30 per cent of GDP. Kittiratt argued that such a move would put the government in a better position to shoulder the new flood-recovery debt of Bt400 billion.

However, the government should instead put priority on how to effectively manage its outstanding and future debt, instead of simply passing the burden on to the Bank of Thailand in order to enable the government to borrow more money to finance its spending programmes.

While some may argue that the Bank of Thailand is well equipped with foreign reserves of around US$180 billion, this amount can be deceptive because the central bank has to consider exchange-risk losses from stabilising the level of the baht amidst the unpredictable global financial market. Central bank governor Prasarn Trairatvorakul said that the BOT currently holds negative equity of more than Bt400 billion.

In addition, the transfer of the debt burden could affect the credibility of Thailand's monetary system because the central bank is in charge of protecting monetary stability. The additional burden from the FIDF could also affect the independence of the central bank.

The decision to pass the debt burden to the central bank could be seen as a move to put pressure on the BOT to relax its monetary policy. This is despite the fact that the government has more tools to deal with the public debt burden, such as fiscal policies and taxation.

It is understandable that the government will now need additional money in order to deal with the disastrous effects of the massive flood disaster. But the administration should instead reprioritise its spending plans instead of going all out with its populist schemes at the expense of the other institution's operations.

The government should set a priority plan to manage its budget and fiscal policies more effectively by cutting unnecessary spending and preventing corruption. The latter is a big problem that could cause huge portions of the budget to be squandered. A massive budget does not guarantee any success in its management. Quite the contrary.

-- The Nation 2011-12-29

[Moruya]

As someone who wants to see Thailand improve it's place in the world and prosper I am aghast at this proposal.

As someone who is paid in US dollars and holds very little in THB deposits I say bring it on.

The inflation this country will see could be huge.

[Skywalker69]

As someone who wants to see Thailand improve it's place in the world and prosper I am aghast at this proposal.

As someone who is paid in US dollars and holds very little in THB deposits I say bring it on.

The inflation this country will see could be huge.

+1

[hellodolly]

As someone who wants to see Thailand improve it's place in the world and prosper I am aghast at this proposal.

As someone who is paid in US dollars and holds very little in THB deposits I say bring it on.

The inflation this country will see could be huge.

+1

+2

And with the present government it is a very distinct possibility.

[TAWP]

"I thought the nation didn't have any debt left over from the crisis -97 after Thaksin paid it off. With his own money."

Anyway, nice to shift the debt around so they can spend more... *sigh*

[Moruya]

"I thought the nation didn't have any debt left over from the crisis -97 after Thaksin paid it off. With his own money."

Anyway, nice to shift the debt around so they can spend more... *sigh*

His fine wouldn't even cover one annual interest payment unfortunately as the rates are exorbitant.

Still, if they move the 1.15T THB debtt to the BOT's books they will be able to borrow even more money to pay for all the promises they made campaign time. Might even have enough left over to pay Thaksin his fine back if they haven't already done so!

[Arkady]

"Public debt currently stands at Bt4 trillion, or about 40 per cent of the gross domestic product (GDP). This includes the debts of the FIDF, which if transferred to the BOT would lower the public debt level to 30 per cent of GDP. Kittiratt argued that such a move would put the government in a better position to shoulder the new flood-recovery debt of Bt400 billion."

I think what he means is that the government could side step the legal constraint that sets a limit on government debt relative to GDP, not that lenders would be more willing to lend since they would probably add the debt back in their own credit analysis. Unfortunately Kittirat has only a tenuous grasp of macroeconomics and his main qualification was having done favours for Thaksin and the rejection of the job offer by several more qualified candidates who were unwilling to do Thaksin's bidding.

"The decision to pass the debt burden to the central bank could be seen as a move to put pressure on the BOT to relax its monetary policy. This is despite the fact that the government has more tools to deal with the public debt burden, such as fiscal policies and taxation."

What this interesting para means is left pretty much to the reader's imagination. Would the BOT have to relax its monetary policy in order to boost inflation and thereby reduce in real terms the value of the baht debt it is forced to consume? Another interesting aspect that is completely missed out in all the news reports is that the BoT is actually one of the major owners of FIDF debt. So would it be forced to write off the debt it owns and, if so, what would be the effect of that on monetary policy? Already the BoT has B400 bn of negative equity resulting from its own miserable attempt to defend the baht in 1997. Effectively what they are saying is that the central bank will have to eat into its foreign reserves to pay off this debt. But those foreign reserves are essentially created as a result of foreign inflows and are technically kept in reserve against the day when the foreign inflows, most of which are loans, are reversed. China has used some of its massive foreign reserves to recapitalise state banks which had huge losses due to bad loans to basket case state enterprises. However it was a much smaller percentage of the foreign reserves and there was no public debate about it or dissent from the central bank. I think this is a very bad sign from a government sponsored by a man who has exhibited serious kleptocratic tendencies in the past.

[monkfish]

Shouldn't the FIDF actually be phased out now or at least restructured so the burden of 60 billion in interest rates doesn't fall to tax payers any more?

Isn't it time Banks started paying back their debts

[khunken]

Shouldn't the FIDF actually be phased out now or at least restructured so the burden of 60 billion in interest rates doesn't fall to tax payers any more?

Isn't it time Banks started paying back their debts

This has little or nothing to do with the banks. The FIDF debt occurred in 1997 when Chavalit's government took over the bankrupted finance companies which ran up massive bad loans in a property bubble. Sound familiar?

[animatic]

EDITORIAL

Passing the buck to satisfy its own political agenda

The Nation

The government wants the central bank to take on responsibility for public debt so that risky populist schemes can go ahead, possibly at great expense to the public and country

The government's decision to pass responsibility for the Bt1.14 trillion in public debt from the 1997 Asian financial crisis to the Bank of Thailand should be based on how to manage the debt burden effectively, not simply to pass the buck to another agency.

Nevertheless, it seems that the decision to pass on the debt responsibility from the Finance Ministry to the central bank is related to the government's plan to borrow more public money to finance its populist policies and its flood-relief programmes. The government does not seem to have a better plan to improve its public debt management.

At present the Finance Ministry has to shoulder the 1997 debt repayment to the tune of Bt60 billion per year. As a result, the ministry does not have much flexibility in financing its investment programmes....

...

-- The Nation 2011-12-29

Wait!!

How many times has Thaksin said and his minions repeated that

'Thaksin paid off the countries Debt from the '97 crash',

and then they blamed the Democrats for the debt,

until 'THAKSIN FIXED IT'....

And now we find him doing the same because he NEEDS MORE MONEY,

SO SUDDENLY that long ago paid off debt returns

is palmed off on the central bank to pay it off.

This is just another round of spurious slight of hand accounting.

The same kind of accounting he wanted to be able to pull off

by selling the IMF's Debt to his friends in Singapore,

and getting the EYES of the IMF off of his books.

Good deal for Singapore,, good dea for Thaksin,

bad deal 10 years later for Thailands citizens.

So has ANYONE in the Thai Press corp looked at

the time line and origins of the TOTAL Debt Package

that is being forced onto the Central banks books,

and thus OFF the current Governments books?

Korn would have done this long before if there was a practical,

logical method AND reason to do this for the betterment of the country.

Edited December 29, 2011 by animatic

[KKvampire]

I have said it before on TV and will say it again "Thailand will become a "basket case" economy in 15~20.years. I said it before the flooding and now those events will hasten, the management by its politicians is mirrored by its attitude to everything else in life. And the fact that they elect a total novice puppet as their leader.

Edited December 30, 2011 by Scott
formatting

[Heimdallr]

I think we have already established a word for this: Thaksinomics.

[Moruya]

Robbing Somchai to pay Shinapong

[Credo]

So those that think the debt to the IMF wasn't paid off, can you tell us just how they convinced the IMF it was paid?

[Moruya]

So those that think the debt to the IMF wasn't paid off, can you tell us just how they convinced the IMF it was paid?

Did the IMF count their fingers?

[TAWP]

So those that think the debt to the IMF wasn't paid off, can you tell us just how they convinced the IMF it was paid?

Well, one can pay creditor A by getting a creditcard from bank B and maxing out on it...seemingly this was the topic of many episods of Oprah and others with people that weren't able to manage their economy etc and had bought into the neo-american dream that consumption above your means was the way to happiness.

Is this the case here? I cannot say, I didn't know about this specific amount. Good that we now know it exists...

[teetersb]

I see these articles concerning the Thai debt (supposedly paid off by Thaksin) again and again, but there doesn't seem to be any "Thai" news articles connecting the previous debt to the current FIDF interest payments! My Thai wife, and even some of my Farang friends, believe the '97 debt has been paid off! Will we, including Thais, ever see an article connecting these inconsistencies printed in English & Thai media?

[phiphidon]

I think we have already established a word for this: Thaksinomics.

Perhaps if you read these articles you might be enlightened about "Thaksinomics" and the future of Public Debt under PTP.

http://asiancorrespondent.com/20150/ruining-the-economy-through-budget-surpluses/

http://asiancorrespondent.com/50378/has-public-debt-really-reduced-under-the-abhisit-government/

http://asiancorrespondent.com/65473/thailands-spiralling-public-debt/

[scorecard]

EDITORIAL

Passing the buck to satisfy its own political agenda

The Nation

The government wants the central bank to take on responsibility for public debt so that risky populist schemes can go ahead, possibly at great expense to the public and country

The government's decision to pass responsibility for the Bt1.14 trillion in public debt from the 1997 Asian financial crisis to the Bank of Thailand should be based on how to manage the debt burden effectively, not simply to pass the buck to another agency.

Nevertheless, it seems that the decision to pass on the debt responsibility from the Finance Ministry to the central bank is related to the government's plan to borrow more public money to finance its populist policies and its flood-relief programmes. The government does not seem to have a better plan to improve its public debt management.

At present the Finance Ministry has to shoulder the 1997 debt repayment to the tune of Bt60 billion per year. As a result, the ministry does not have much flexibility in financing its investment programmes....

...

-- The Nation 2011-12-29

Wait!!

How many times has Thaksin said and his minions repeated that

'Thaksin paid off the countries Debt from the '97 crash',

and then they blamed the Democrats for the debt,

until 'THAKSIN FIXED IT'....

And now we find him doing the same because he NEEDS MORE MONEY,

SO SUDDENLY that long ago paid off debt returns

is palmed off on the central bank to pay it off.

This is just another round of spurious slight of hand accounting.

The same kind of accounting he wanted to be able to pull off

by selling the IMF's Debt to his friends in Singapore,

and getting the EYES of the IMF off of his books.

Good deal for Singapore,, good dea for Thaksin,

bad deal 10 years later for Thailands citizens.

So has ANYONE in the Thai Press corp looked at

the time line and origins of the TOTAL Debt Package

that is being forced onto the Central banks books,

and thus OFF the current Governments books?

Korn would have done this long before if there was a practical,

logical method AND reason to do this for the betterment of the country.

+1

[TAWP]

I think we have already established a word for this: Thaksinomics.

Perhaps if you read these articles you might be enlightened about "Thaksinomics" and the future of Public Debt under PTP.

http://asiancorrespo...dget-surpluses/

http://asiancorrespo...sit-government/

http://asiancorrespo...ng-public-debt/

As long as anyone is noting that it is written by an expat blogger with no official credits and with a shown history of pro-Thaksin/TRT/PPP/PTP/Red Shirt bias. With that in mind, it is still interesting to dig through the numbers.

Edited December 31, 2011 by TAWP

[phiphidon]

I think we have already established a word for this: Thaksinomics.

Perhaps if you read these articles you might be enlightened about "Thaksinomics" and the future of Public Debt under PTP.

http://asiancorrespo...dget-surpluses/

http://asiancorrespo...sit-government/

http://asiancorrespo...ng-public-debt/

As long as anyone is noting that it is written by an expat blogger with no official credits and with a shown history of pro-Thaksin/TRT/PPP/PTP/Red Shirt bias. With that in mind, it is still interesting to dig through the numbers.

Despite your reservations that the articles are written by "an expat blogger with no official credits" (as if this is an some kind of insult to the established english language press in Thailand) the figures he uses and presents in such an "interesting" way (i.e debunks the widely held and publicised theory that "Thaksinomics" caused great debt in Thailand) are based on quotes from the Asian Development Bank and figures from the Thai Public Debt Management Office of the Ministry of Finance.

Difficult to argue with official figures isn't it.

Incidentally the Bangkok Pundit can be regarded as "the checks and balances" standard for both The Nation and the Bangkok Posts' more extremely biased articles, one that is sorely needed.

[TAWP]

Bangkok Pundit has no credits, neither domestic nor international. Didn't mean specifically for the former. And his bias is clear and shown under the years - and admitted if asked.

And while numbers, albeit unverified, isn't the focus of the argument, the deduction and wording used by a 'pundit' can be. If you don't believe facts can be twisted by a selective narrative, check out Fox News and MSNBC.