Thai Constitution Court Verdict May Hinge On 'Urgency' Of Debt Moves

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BURNING ISSUE

Verdict may hinge on 'urgency' of debt moves

THE NATION

BANGKOK: -- Tomorrow the government is likely to see one of two wishes come true - and unfortunately its unfulfilled desire looks set to trigger a legislative battle which could drag on for about a year.

The Constitution Court is due to rule on the legality of two executive decrees - one on management of Bt1.14-trillion in debt by the central bank, the other on Bt350 billion in finance sought for flood control projects.

The two decrees are part of a four-decree package aimed at preventing a repeat of last year's flood disaster.

The four decrees were based on a concept by respected economist Virabongsa Ramangkura. Deputy Prime Minister Kittiratt Na Ranong translated the idea into decree provisions.

Former finance minister Thirachai Phuvanatnaranubala agreed to sponsor the decrees despite objecting to certain provisions before he was shuffled out of the Cabinet last month.

Two of four decrees took effect without any legal dispute. But the Democrats and senators questioned the other two, prompting the high court's review.

The judicial outcome will go one of three ways - a total victory for the two decrees in question, a complete defeat, or partial approval in which one is passed and another rejected.

In order to pass or strike down the decrees, the high court will form a decision based on two legal issues - whether the provisions were designed to mitigate or prevent the disaster and whether the government has justified urgency to bypass the normal legislative process.

When Virabongsa formed his idea on the decrees, he envisioned the future of a post-flood economy. He wanted to bring the seasonal floods under control as well as ensure new economic heights.

The four-decree package was designed to boost business confidence in the country's commitment, technical capability and finances for flood control.

From the government's point of view, the decrees were deemed necessary because work must be implemented before the arrival of seasonal floods. The legislative process was not an option due to time constraints.

On top of flood control plans, Virabongsa took an extra step to try and manipulate the cap on public debt in order to ensure fiscal room to finance such major projects.

It is the extra step that has triggered the government's legal wrangling. Virabongsa is trying to manipulate state accounting by the transfer of Bt1.14 trillion in debt, incurred by the central bank's Financial Institutions Development Fund during the 1997 crisis, from the government to the Bank of Thailand.

Without the debt transfer, the government has almost no room for fiscal measures to improve the economic infrastructure because public debt is hovering at almost 10 per cent of the annual budget. The limit is 16 per cent.

Democrat MP Korn Chatikavanij spearheaded opposition to the debt transfer and flood-control financial package. He said the government rushed to outline borrowing plans even before flood-control projects got off the drawing board.

The Yingluck government has subsequently released its spending plans, hence lessening the opposition's pressure on flood-control financing.

The gist of tomorrow's decision will boil down to the fiscal discipline in connection with the Bt1.14 trillion debt transfer. Although the government has tried to link the fiscal issue to flood control, Korn has made a convincing argument that the issue is not urgent enough to justify use of a decree.

If the high court concurs with Korn's argument, the government will be obliged to sponsor and enact legislation in lieu of a decree for debt management. But legislative debate over this is expected to be a worry for two reasons - the issue of fiscal discipline is sensitive and bankers are strongly opposed to the central bank having to shoulder such a huge amount of public debt.

-- The Nation 2012-02-21