OVERDRIVE

Budget is all about plundering for a spending spree

Thanong Khanthong

BANGKOK: -- The Yingluck government has set the 2013 fiscal budget at Bt2.4 trillion, which will require a deficit of Bt300 billion because revenue collection is expected to reach only Bt2.1 trillion.

This deficit spending of Bt300 billion is less than the last fiscal year's Bt400 billion, but it still represents 3-4 per cent of the gross domestic product.

Thailand's public debt now stands at 42 per cent of GDP. If the government continues to rack up the deficit and other debts, we'll be heading faster to the public-sector debt limit of 60 per cent of GDP.

Korbsak Sabhavasu of the Democrat Party says the government has run up budget deficits of more than Bt600 billion in two years. Yet it has repaid only around Bt100 billion. This means that debt creation is running significantly faster than repayment.

All of this has yet to take into account the off-balance sheet debt creation by the government, from Bt300 billion for the rice subsidy scheme, the rubber price intervention and other massive spending projects, all of which will eventually have to be factored into the government's accounting book.

Earlier, the Finance Ministry sought approval from the Cabinet to raise the public debt by another Bt450 billion. Of this, Bt350 billion will account for borrowing to compensate those who suffered damages from last year's floods; Bt50 billion for contributions to the flood insurance fund; and Bt50 billion to cover the revenue shortfall. This borrowing spree will raise the public debt to GDP ratio to 50 per cent within this year or next.

Dr Narongchai Arkarasenee, a former commerce minister, has warned that the government should in fact keep the public debt to GDP ratio at 50 per cent or less. Since the government's spending accounts for around 20 per cent of GDP, raising the public debt beyond 50 per cent of GDP would put the country's fiscal position at risk.

Apart from this ongoing massive debt creation, the government also plans to dig deep into the vaults of the Bank of Thailand to spend at least US$100 billion (Bt3 trillion) of its $180 billion in international reserves.

Dr Virabongsa Ramangkura, who now heads the board of the Bank of Thailand, has said that the central bank should not hold such an unnecessary reserve surplus. The excess money should be used for infrastructure investment projects that will help lay the foundation for future growth.

The Bank of Thailand's reserves of $180 billion should be enough to defend the baht or facilitate international trade transactions.

Dr Prasarn Trairatvorakul, the Bank of Thailand governor, is protecting the reserves like - as the old Thai saying goes - "a snake protecting its eggs". However, the government has already shown so far that it has no respect for fiscal discipline. And now it wants to spend even more by coming up with justifications to appropriate money from the international reserves.

Bank of Thailand officials are still haunted by the 1997 baht crisis when the central bank lost almost all of its reserves and the country was forced to accept a support programme from the International Monetary Fund.

With the sudden removal of Piyasavasti Amranand as president of Thai Airways International - supposedly over conflict regarding the long-term aircraft acquisition programme - a similar situation might arise with Dr Prasarn at the Bank of Thailand.

The government is going to spend money like crazy and will test its borrowing to the limit. It has insisted that it will keep the ceiling at 60 per cent of GDP. But we can hardly trust the word of politicians on their borrowing and spend.

If the global economy heads south and Thailand's GDP takes a hit for several years in a row, the debt to GDP ratio will rise to 80 per cent or 100 per cent in a hurry. Then we will become another Greek tragedy.

-- The Nation 2012-05-25

All of this has yet to take into account the off-balance sheet debt creation by the government, from Bt300 billion for the rice subsidy scheme, the rubber price intervention and other massive spending projects, all of which will eventually have to be factored into the government's accounting book................

Apart from this ongoing massive debt creation, the government also plans to dig deep into the vaults of the Bank of Thailand to spend at least US$100 billion (Bt3 trillion) of its $180 billion in international reserves.............If the global economy heads south and Thailand's GDP takes a hit for several years in a row, the debt to GDP ratio will rise to 80 per cent or 100 per cent in a hurry. Then we will become another Greek tragedy.

Hmmm more proof that the rebound from the floods was through government spending and and growth this year will be through debt. What an inept government they are so concerned with feeding their corruption that they are taking the country to ruin. But what would you expect from a government headed by a convicted criminal and fugitive from justice through a hand puppet that seldom goes to parliment.

Edited May 24, 201214 yr by waza

A sensationalist and apocalyptic article which highlights the worst case scenario.

The flip side of the coin is if the global economy picks up and grows and Thailand is able to take a lead role on the development of the ASEAN economic community, increased tax revenue will be collected by the government to pay for the borrowing and development of new infrastructure.

A sensationalist and apocalyptic article which highlights the worst case scenario.

The flip side of the coin is if the global economy picks up and grows and Thailand is able to take a lead role on the development of the ASEAN economic community, increased tax revenue will be collected by the government to pay for the borrowing and development of new infrastructure.

Yes, there will come a time when the global economy picks up again.... But not anytime soon!

Thailand's public debt now stands at 42 per cent of GDP

we'll be heading faster to the public-sector debt limit of 60 per cent of GDP

Dr Narongchai Arkarasenee, a former commerce minister, has warned that the government should in fact keep the public debt to GDP ratio at 50 per cent or less

Now I can't say that I wouldn't prefer them to be spending it all on schools, but this article is so amazingly gloomy considering at 42% Thailand's fiscal position is amazingly strong, the real issue is what is the actual GDP growth for the country going to be for the next 3 to 5 years. If the economy grows 3%, and government borrowing increases 3% there is no growth to GDP ratio. Now, we can all love the fact that Thailand is this quaint developing country, or we can realise that there is still decades of development that needs to take place in Thailand to get schools, education, roads, healthcare and infrastructure to a better level. Someone has to spend the money to do it.

At 42% you get crap schools and holes with roads, and all the other "quaint" parts of life we live with here today, or we can realise that for Thailand to improve, spending has to occur. A debt level of 50% should be more than affordable for Thailand. The issue is where is the money that is being borrowed being spent, not the spending per se. It is capped by law to 60% anyway, so the odds that it would get to "Greek" levels as commentators have been harping on about is nonsense anyway.

As for those who have bemoaned a strong baht, just wait if they start taking money from the 180bn USD out of the central bank and start spending it in baht. Back to 25 to the USD we go. The Chinese have been doing this for years to keep their yuan relatively weak and for those who have been scratching their heads wondering why the baht is so strong, Thailand now holds and has accumulated as much or more forex than many our home countries, for the precise reason of keeping the baht from strengthening even more.

Forex holdings globally

http://en.wikipedia.org/wiki/Foreign-exchange_reserves#List_of_countries_by_foreign_exchange_reserves

1 People's Republic of China $ 3,305 (Mar 2012)[5]

2 Japan $ 1,303 (Feb 2012)[6]

3 Eurozone $ 936 (Feb 2012)[7] [8]

4 Saudi Arabia $ 541 (Dec 2011)[9]

5 Russia $ 514 (Feb 2012)[10]

6 Republic of China (Taiwan) $ 386 (Dec 2011)[11]

7 Brazil $ 371 (Apr 2012)[12]

8 Switzerland $ 335 (Mar 2012)[13]

9 South Korea $ 316 (Feb 2012)[14]

10 India $ 293 (Jan 2012)[14]

- Hong Kong $ 285 (Dec 2011)[15]

11 Germany $ 263 (Feb 2012)[14]

12 Singapore $ 247 (Feb 2012)[14]

13 Italy $ 187 (Feb 2012)[14]

14 Algeria $ 186 (Dec 2011)[9]

15 France $ 185 (Feb 2012)[14]

16 Thailand $ 180 (Feb 2012)[14]

17 Mexico $ 154 (Feb 2012)[14]

18 United States $ 149 (Abr 2012)[14]

19 Malaysia $ 135 (Feb 2012)[14]

20 United Kingdom $ 126 (Mar 2012)[14]

Apart from this ongoing massive debt creation, the government also plans to dig deep into the vaults of the Bank of Thailand to spend at least US$100 billion (Bt3 trillion) of its $180 billion in international reserves.

Now that is scary. Wonder where that money is going to end up. I'm sure Thaksin's African contacts would be fabulous places to keep it safe

A sensationalist and apocalyptic article which highlights the worst case scenario.

The flip side of the coin is if the global economy picks up and grows and Thailand is able to take a lead role on the development of the ASEAN economic community, increased tax revenue will be collected by the government to pay for the borrowing and development of new infrastructure.

That is true, but it is also only one 'if' ..... and there are lots of 'if's out there.

Apart from this ongoing massive debt creation, the government also plans to dig deep into the vaults of the Bank of Thailand to spend at least US$100 billion (Bt3 trillion) of its $180 billion in international reserves.

Now that is scary. Wonder where that money is going to end up. I'm sure Thaksin's African contacts would be fabulous places to keep it safe

I tried to work out what 30% of 3 trillion would be but my calculator doesn't have enough digits. They should have played Ginger singing "We're in the Money" as background music.

Is this a rare photo of Yingluk in parliament?

A sensationalist and apocalyptic article which highlights the worst case scenario.

The flip side of the coin is if the global economy picks up and grows and Thailand is able to take a lead role on the development of the ASEAN economic community, increased tax revenue will be collected by the government to pay for the borrowing and development of new infrastructure.

The only bit that's "sensationalist and apocalyptic" is the last part about debt rising to 80%, the rest is a pretty accurate assessment in my opinion. Too many 'ifs' as someone else noted. Given the track record of politicians on all sides the chances of Thailand investing intelligently and taking a lead role in ASEAN seem very unlikely. I have yet to see this govt make one sensible well thought out policy. Their rice policies are driving Thai companies abroad and other dumb things like the Chinese ipads are just laughable. The 300baht wage rise is also going to impact greatly on development and investment. Thaksin's efforts to get the IMF debt moved sideways will also have a big impact on all this. I do not see Thailand heading remotely in the right direction and can't help feeling its all about getting snouts into this very large trough.

Apart from this ongoing massive debt creation, the government also plans to dig deep into the vaults of the Bank of Thailand to spend at least US$100 billion (Bt3 trillion) of its $180 billion in international reserves.

Now that is scary. Wonder where that money is going to end up. I'm sure Thaksin's African contacts would be fabulous places to keep it safe

I tried to work out what 30% of 3 trillion would be but my calculator doesn't have enough digits. They should have played Ginger singing "We're in the Money" as background music.

Is this a rare photo of Yingluk in parliament?

It must have been photo-shopped.

Edited May 25, 201214 yr by Skywalker69

maybe thailand wants to be known in the futher as the : ASIAN GREECE

Yesterday the World Bank also WARNED that the current policy may result in Thailand running out of fiscal resources within two and a half years.

Driving around Bangkok the last few days, I have noted the vast numbers of cranes in every direction as more and more new skyscrapers are built. I am reminded of 1996-97 when from my office window I counted one day 200 cranes visible with the naked eye. A that time I thought " this is madness". The same feelings are coming over me today, although the cost of money is certainly a lot less today.

Korbsak Sabhavasu of the Democrat Party says the government has run up budget deficits of more than Bt600 billion in two years. Yet it has repaid only around Bt100 billion. This means that debt creation is running significantly faster than repayment.

Can someone run this by me again. Which government has only been in government for 10 months of those 24 months, and which government has run up the budget deficit before they were elected?

Interesting to note that Thailands trade deficient has yet again risen. The world, or rather the population and industries of many countries in this world do not have the purchasing power they once had.

Bhakta made an interesting post # 13 (interesting post number) and his comments were the same as my thoughts.

The scene is returning to the era of 1997 and if the brakes are not put on this current maladministration and its suicidal populist spending spree and the resultant financial feeding frenzy that those in the know will indulge in Thailand is yet again going to be a financial basket case.

Edited May 25, 201214 yr by siampolee

Budget, spending, plundering? It's a matter of presenting the right chart

The dollar continues to gain strength aganist the Thai Baht 31.50 something. hehehe with this spending spree we will be back to 40 or so to the dollar.

maybe thailand wants to be known in the futher as the : ASIAN GREECE

Most of us are aware of what going Greek means in sexual matters. Many of us are concerned that most Thai Governments have/are screwing the populace but ...........................

Korbsak Sabhavasu of the Democrat Party says the government has run up budget deficits of more than Bt600 billion in two years. Yet it has repaid only around Bt100 billion. This means that debt creation is running significantly faster than repayment.

Can someone run this by me again. Which government has only been in government for 10 months of those 24 months, and which government has run up the budget deficit before they were elected?

You're into porky pie land once again

Sent from my Galaxy Nexus using Thaivisa Connect App

Korbsak Sabhavasu of the Democrat Party says the government has run up budget deficits of more than Bt600 billion in two years. Yet it has repaid only around Bt100 billion. This means that debt creation is running significantly faster than repayment.

Can someone run this by me again. Which government has only been in government for 10 months of those 24 months, and which government has run up the budget deficit before they were elected?

You're into porky pie land once again

Sent from my Galaxy Nexus using Thaivisa Connect App

It's from the OP and was a genuine question - How can the the Democrat MP accuse the present government of running up budget deficits of Bt600 billion in TWO years when they have only been in governance for 10 months?

Please do not accuse me of lying without backing it or yourself up.

Korbsak Sabhavasu of the Democrat Party says the government has run up budget deficits of more than Bt600 billion in two years. Yet it has repaid only around Bt100 billion. This means that debt creation is running significantly faster than repayment.

Can someone run this by me again. Which government has only been in government for 10 months of those 24 months, and which government has run up the budget deficit before they were elected?

You're into porky pie land once again

Sent from my Galaxy Nexus using Thaivisa Connect App

It's from the OP and was a genuine question - How can the the Democrat MP accuse the present government of running up budget deficits of Bt600 billion in TWO years when they have only been in governance for 10 months?

Please do not accuse me of lying without backing it or yourself up.

The English used may not be perfect but it is clearly talking about the 2 years from PTP taking control

Sent from my Galaxy Nexus using Thaivisa Connect App

--- deleted for quote limit ---

You're into porky pie land once again

Sent from my Galaxy Nexus using Thaivisa Connect App

It's from the OP and was a genuine question - How can the the Democrat MP accuse the present government of running up budget deficits of Bt600 billion in TWO years when they have only been in governance for 10 months?

Please do not accuse me of lying without backing it or yourself up.

The English used may not be perfect but it is clearly talking about the 2 years from PTP taking control

Sent from my Galaxy Nexus using Thaivisa Connect App

I think the English and Phiphidon are correct, from this in Jan 2011, http://asiancorrespondent.com/46776/thai-budget-deficit-to-rise-to-380-billion-baht/

Thailand’s government has set an initial budget deficit target for the 2012 fiscal year starting Oct. 1 at THB380 billion ($12.47 billion), Deputy Prime Minister Trairong Suwannakhiri said Wednesday.

The deficit the year prior (under the Democrats) was 400 billion.

This looks like posturing for political points. More coffee...

Korbsak Sabhavasu of the Democrat Party says the government has run up budget deficits of more than Bt600 billion in two years. Yet it has repaid only around Bt100 billion. This means that debt creation is running significantly faster than repayment.

Can someone run this by me again. Which government has only been in government for 10 months of those 24 months, and which government has run up the budget deficit before they were elected?

Is it possible that he's talking about the 2 budgets - one last year on coming to power, and this one?

Edited May 26, 201214 yr by whybother

If you add the Thaskins years you will find its much much worse..........

"Thaksinomics could have had a devastating effect on the Thai economy if Thaksin had not been stopped when he was removed from power on September 19. Policies implemented under Thaksinomics coupled with populist policies that pandered to the unprincipled wants of people have accumulated whopping Bt150 billion worth of debts, both on and off the budget.

These debts accumulated mostly because Thaksin rushed through populist policies to score quick political points without concerning himself with the crucial question of how to fund them, as a responsible leader should.................But of greater importance is determining how to educate our citizens, particularly the rural masses still enamoured with Thaksin’s populist policies, about the financial ruin that Thailand may have narrowly averted when corruption-prone Thaksin was removed from power in disgrace.........The truth of the matter is there is no such thing as a free lunch. Taxpayers will have to start paying for Thaksin’s populist excess and the mountain of debt he incurred. http://www.nationmultimedia.com/2007/02/01/opinion/opinion_30025662.php

Seems it more of the same

TLansford

Personally I look for my facts in other organs. BP doesn't quite float my boat for the same reason as TAN

In 2010 the public debt was 42.4% of GDP

In 2011 that had reduced to 40.5%

The amount of budget that will be off the sheet with the PTP policies will be much larger. They have also shifted over a trillion baht in bad (Thaksin) debt to the BOT as well as borrowing hundreds of billions for their various schemes.

Thailand is an export driven economy. That is what has traditionally got it out of trouble. With the current market dropping and rice exports a disaster it will certainly see a drop in income from exports.

TLansford

Personally I look for my facts in other organs. BP doesn't quite float my boat for the same reason as TAN

In 2010 the public debt was 42.4% of GDP

In 2011 that had reduced to 40.5%

The amount of budget that will be off the sheet with the PTP policies will be much larger. They have also shifted over a trillion baht in bad (Thaksin) debt to the BOT as well as borrowing hundreds of billions for their various schemes.

Thailand is an export driven economy. That is what has traditionally got it out of trouble. With the current market dropping and rice exports a disaster it will certainly see a drop in income from exports.

check the source referenced by the BP and you'll probably think it is a reliable one. They did not pull it out of thin air.

regardless, the MP was talking about the debt incurred by the government, and it is likely that he is talking about the debt from the previous admin. And, even if by some means of poor reporting or misquoting that this is not the case, the debt run by the democrats was 400 Billion and 380 billion respectively and they are complaining here about a 300 billion shortfall.

??

If you add the Thaskins years you will find its much much worse..........

"Thaksinomics could have had a devastating effect on the Thai economy if Thaksin had not been stopped when he was removed from power on September 19. Policies implemented under Thaksinomics coupled with populist policies that pandered to the unprincipled wants of people have accumulated whopping Bt150 billion worth of debts, both on and off the budget.

These debts accumulated mostly because Thaksin rushed through populist policies to score quick political points without concerning himself with the crucial question of how to fund them, as a responsible leader should.................But of greater importance is determining how to educate our citizens, particularly the rural masses still enamoured with Thaksin’s populist policies, about the financial ruin that Thailand may have narrowly averted when corruption-prone Thaksin was removed from power in disgrace.........The truth of the matter is there is no such thing as a free lunch. Taxpayers will have to start paying for Thaksin’s populist excess and the mountain of debt he incurred. http://www.nationmul...on_30025662.php

Seems it more of the same

Which was shown up as just so much B/S in an article I've posted before about the myths of Thaksinomics

So Thaksin comes to power to find a dramatic increase in public debt with the government using almost 11% of revenues to finance this debt. Under Thaksin the ratio of public debt to GDP decreased from just under 58% at the end of 200 to 41.7% in 2006. Yes, you read that right the ratio of public debt to GDP fell under Thaksin. Far from there being a “mountain of debt” the country was in a much more sustainable fiscal position. The so-called “financial ruin” that Thaksin brought to the Thai economy included budget surpluses between 2003-2005. The Nation’s editorial is so devoid of any logic it is breathtaking, but we came to expect that from The Nation.

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

Don't ignore it, read the article and the ones mentioned below the main text.

Edited May 26, 201214 yr by phiphidon

So you repudiate the Nations article using the Bangkok Pundits blog site? Next you will be quoting Amsterdam.

It should be noted that Thaksinomics has not advocated personal saving or supported long term investment. Nor was Thaksin endorsed for good governance or avoiding conflicts of interests.

Thaksin was able to carry out these policies because the economy had recovered from the Asian financial crisis of 1997. The former government, led by the Democrat Party, had already implemented the necessary measures to stabilise the country’s international reserves and had reformed the banking system. Thaksin was able to use the reserves accumulated by the Chuan government to repay Thailand’s debt to the IMF ahead of schedule and claimed credit for this feat for himself.

In late 2004 and 2005, Thailand’s economic growth decelerated as a result of rising inflation and oil prices. Its economy was plagued by consumer debt and trade deficits as a result of Thaksin’s populist policies. Corruption and allegations of disrespecting the monarchy were widespread. The sale of Thaksin’s family-owned business — ShinCorp — which involved avoiding income tax, ignited an outcry, particularly from the middle class who bore the majority of the tax burden. The Bangkok middle class protested, sowing the seeds for the coup in September 2006. Interestingly, the urban population did not show any resistance to the military intervention.

http://www.eastasiaforum.org/2011/08/08/thailands-economy-vulnerable-to-populist-politics/

So you repudiate the Nations article using the Bangkok Pundits blog site? Next you will be quoting Amsterdam.

It should be noted that Thaksinomics has not advocated personal saving or supported long term investment. Nor was Thaksin endorsed for good governance or avoiding conflicts of interests.

Thaksin was able to carry out these policies because the economy had recovered from the Asian financial crisis of 1997. The former government, led by the Democrat Party, had already implemented the necessary measures to stabilise the country’s international reserves and had reformed the banking system. Thaksin was able to use the reserves accumulated by the Chuan government to repay Thailand’s debt to the IMF ahead of schedule and claimed credit for this feat for himself.

In late 2004 and 2005, Thailand’s economic growth decelerated as a result of rising inflation and oil prices. Its economy was plagued by consumer debt and trade deficits as a result of Thaksin’s populist policies. Corruption and allegations of disrespecting the monarchy were widespread. The sale of Thaksin’s family-owned business — ShinCorp — which involved avoiding income tax, ignited an outcry, particularly from the middle class who bore the majority of the tax burden. The Bangkok middle class protested, sowing the seeds for the coup in September 2006. Interestingly, the urban population did not show any resistance to the military intervention.

http://www.eastasiaf...ulist-politics/

I thought the argument was Thaksinomics would lead Thailand to ruin as according to the Nation. You then question the Bangkok Pundit that lays out figures that according to the Asian Development Bank show that the countrys fiscal position is sustainable in fact getting more so. Come the coup and the 2007 budget

What do you think the new sufficiency economy government did when they came to power? Instead of running a budget surplus, they are going to run a deficit of 146 billion baht in the 2007 budget of which 40 billion baht can be blamed on Thaksin. The other 100 billion baht is going to the military and other projects.

The Nation which dislikes “populist policies that pandered to the unprincipled wants of people” was supportive of the extra 200 billion baht in the 2007 budget in another editorial just the other day:

Although exports should continue to post double-digit growth figures, the Thai economy really needs a fiscal prime-pumping to keep on track with a 4-per cent to 5-per cent growth rate.

COMMENT: That money will be spent on rebranded “populist” policies, but since Thaksin is not behind them, it is not just ok, but gets The Nation’s tick of approval.

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

Which is exactly what this is about, isn't it - you've been told Thaksinomics is bad but when you're told it's not and in fact he had a couple of years of budget surplus, because Thaksin is behind it, it can't be true.

"Interestingly, the urban population did not show any resistance to the military intervention". With their history are you really suprised?

Edited May 26, 201214 yr by phiphidon

I seem to remember Korn quoted, when his view on Thaksinomics was requested......

"Thaksinomics?.......more of the same"