This Government Is Not Thinking Ahead: Thai Opinion

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OVERDRIVE

This government is not thinking ahead

Thanong Khanthong

The government has finally stuffed the 1997 legacy debt of Bt1.14 trillion down the throat of the Bank of Thailand.

This will give the government more room to create massive new debt of Bt2.27 trillion, earmarked for "New Thailand" mega-projects between 2012 and 2016.

As a result, Thailand's public debt profile will be significantly changed. It could be a replay of the Greek tragedy.

This transfer of the Financial Institutions…. (FIDF) debt to the central bank is a breach of both fiscal and monetary discipline. On the fiscal side, the Finance Ministry, which collects taxes and other revenues, is not doing its job. It is responsible for paying off the country's public debt.

On the other hand, the Bank of Thailand is an institution set up to manage the country's monetary policy. It does not collect tax and is not responsible for public debt repayment.

The Finance Ministry has been allocating about Bt45-Bt60 billion a year to pay for the interest cost of the FIDF debt. The Bank of Thailand assumes the principal debt of the FIDF. If the Finance Ministry finds the FIDF debt a burden to pay off, it should not rush to create new debt. It will take about 30 years to pay off all the FIDF debt, a financial sin that all Thai taxpayers are now painfully shouldering.

On the monetary side, the Bank of Thailand could slip into the practice of money printing if it were to assume all the burden of the FIDF debt. If it can't come up with enough money from its own operation, its foreign reserves management, its regulation to force commercial banks to contribute to the FIDF debt payment, the central bank will inevitably have to print money to pay for the FIDF obligation.

Printing money will undermine confidence in the baht. Capital could head to the exit door. Inflation would surge. Thailand, again, could lose its foreign reserves in a hurry, like in 1997.

The transfer of the FIDF debt to the Bank of Thailand comes amid the heavy-handed debt creation of the Yingluck government.

Firstly, of the Bt2.38 trillion budget for the 2012 fiscal year, the government has projected revenue of Bt1.9 trillion plus. This means that it will be running a deficit of around Bt400 billion.

Secondly, a quasi-government committee headed by Dr Virabongsa Ramangkura is planning to raise Bt350 billion to invest in flood prevention projects.

Thirdly, the Bank of Thailand will have to come up with Bt300 billion in a flood relief fund, which would, through the commercial banks, offer low-interest loans to small- and medium-scale enterprises hard hit by the floods.

Finally, a national insurance fund of Bt50 billion will be created to help cushion the rising cost of insurance premiums of factory operators or companies. Global insurers have lost a lot of money from the Thai floods. They are now demanding prohibitive insurance premium on coverage of possible future floods.

A quick calculation is that Bt1.1 trillion is being raised for fresh spending for the reconstruction of the Thai economy, which has been damaged by the floods to the tune of Bt1.4 trillion. This amount does not include big-ticket spending of another Bt2.27 trillion on the "New Thailand" project, which will focus on improving the physical infrastructure of the country.

It is obvious that the government wants to create massive debt for Thailand in a hurry. Right now the country's public debt is about Bt4 trillion, representing 40 per cent of the gross domestic product. The public debt to GDP ratio could rise quickly to 60-70 per cent because of the spending spree by this government. And we all know that government spending is heavily associated with corruption.

The danger is that once the debt profile of the country deteriorates, it will be extremely difficult to repair. At present, Thailand's fiscal and monetary strength is the envy of the world. The fiscal positions of most European countries, the US as well as Japan, are practically insolvent. Government debt to GDP ratios of these countries have risen by more than 100 per cent to GDP, making it almost impossible to service the debts. That's why the European Union is in deep financial turmoil, which could break up the euro zone this year.

With the threat of a deepening euro-zone crisis, a slowdown in China and prolonged US weakness, plus growing confrontation between US allies and Iran in the Middle East, the government should instead adopt a prudent fiscal policy. All tax money must be spent carefully in anticipation of hard times ahead. Additional debt should be discouraged. This will help Thailand muddle through the 2012 crisis and beyond.

-- The Nation 2012-01-13

[FOODLOVER]

Clueless.

[alstaxi]

This government is not thinking ahead

Thanong Khanthong

[maidu]

Perhaps they're thinking ahead - just as far as staying in power. A majority of Thai people have shown that they're easily duped. The same majority who voted in PT party, even though their most ardent supporters rioted and trashed Bangkok in the prior two out of three years. The majority of Thai voters have shown they don't mind placing a tax-dodging fugitive as the government's primary thinker (remember: "Thaksin thinks, Puea Thai Acts" ?).

The Lion's share of Thailand's current and future expenditures will be devoted to flood-related measures for Bangkok. Much of those expenditures could be avoided by starting to move Bkk's people and services to higher ground. The past several decades and trillions of baht have already been spent to try and keep Bkk dry, yet 2011 was the 'worst flood ever'. Future floods will be worse. Why pour trillions of baht toward a losing cause?

[Thaddeus]

This government is not thinking ahead

Thanong Khanthong

This government is not thinking of Thailand

Fixed.

[DocN]

This government???

[animatic]

Can you say; "Going Tits Up", sooner than expected.

[Pib]

Oh, this government is thinking ahead...they are hoping their populist policies funded by whatever means will keep them in power for a long time.

[comeondoit]

i see the new gouvernement as seen before, corrupt!! (corrupt is a way of life in thailand) just funneling the money now into other pockets. the only thing which changed is that this governement is even more incompetent than the earlier one, stupid and incompetent new governement officials are now being consulted by even more stupid and highest incompetent biggest red shirts criers (the ones with the biggest mouth). i am sorry for the thais, because i love that country and wish them more fun. however there is as well a saying, "the people get the governement they deserve"

the cries for justice everywhere and from every side will lead to more injustice, because like in a war there are no unguilty persons on any one side of the medal and who has the independency to judge????......no one, because that cannot be done by a human being.

there is only one solution...pay for the deads to linder financial losses

(if they can make money, they will be happy, of course they will be trying to get the most out of the governement, with all the handouts here the mentaility to cry for help from the governement for every mishap is becoming the thai standard),

without prejudice and false justification...and tell the people for the future to be more prudent and finally to start thinking before following big mouthing politically motivated people...they are never true. unfortunately in thailand, more so than in other countries, lies are becoming the truth, if you just repeat them often enough.

[exeter]

Forward planning and thinking ahead is not a Thai trait I have noticed, although must admit the g/f asked for a diary and is using it and now makes sure she has enough to pay the months end bills, in Thai terms she should get a Bachelors Degree in looking ahead.

"Keep up the good work" ( could be a PM one day!)

Headmaster.

[anterian]

So why in spite of this is the exchange rate not moving, in the past few months it crept briefly to 49 Baht to the Pound, it is now creeping back to 48 to the Pound.

[Xonax]

This government is not thinking ahead

Did any Thai government or Thai citizen ever think ahead?

[fire and ice]

They will fall into a debt spiral and/or print money and end up wiht hyper-inflation.

Then the shit will hit the fan and it will be the fault of farangs (or just George Soros again).

[bigbamboo]

The government is thinking ahead......... just not very far ahead.

Edited January 13, 2012 by bigbamboo

[David48]

So why in spite of this is the exchange rate not moving, in the past few months it crept briefly to 49 Baht to the Pound, it is now creeping back to 48 to the Pound.

Not trying to appear rude ... but maybe more a reflection on the British Pound.

In the trade weighted index, the Pound, as measured against a 'basket' of currencies is near all time lows. See http://www.ashraflaidi.com/charts/gbp-trade-weighted-index.asp

As opposed to the Aussie Dollar which is at a near 10 year high.

Less Poms (and Yanks) and more Aussies in Thailand ... don't know if that's a good idea?

Less Indians (Rupee down) though ...

[trainman34014]

The Government, as individuals, are only thinking ahead long enough to get their hands on huge amounts of that Bt2.27trillion. The 'New Thailand' they have in mind is one where they will become richer than ever before and the 'people' remain mainly poor and uneducated. Meanwhile they will be telling them that they should feel privileged to be able to ride on the new high speed railway and fly off at the first bend doing 350 kph.

[anterian]

So why in spite of this is the exchange rate not moving, in the past few months it crept briefly to 49 Baht to the Pound, it is now creeping back to 48 to the Pound.

Not trying to appear rude ... but maybe more a reflection on the British Pound.

In the trade weighted index, the Pound, as measured against a 'basket' of currencies is near all time lows. See http://www.ashraflai...ghted-index.asp

As opposed to the Aussie Dollar which is at a near 10 year high.

Less Poms (and Yanks) and more Aussies in Thailand ... don't know if that's a good idea?

Less Indians (Rupee down) though ...

Rather my thoughts also

Incidentally, the length of a piece of string is precisely long enough to reach from one end to the other, this is known as an axiom