Falling treasury reserves: There’s more to it than the govt’s claims

[webfact]

Falling treasury reserves: There’s more to it than the govt’s claims
By Attayuth Bootsripoom

 

 

BANGKOK: -- A debate has been raging since last week as to whether the government is “broke” after the Finance Ministry disclosed that the country’s treasury reserves have fallen to Bt74.9 billion.

 

The government has strongly dismissed the perception that it is in a financially troubled situation, explaining that it was revamping the country’s budgetary system. It assured people that the existing reserves were appropriate, as the country did not need to borrow, which in turn would lead to an interest burden. The reserves have been spent stimulating the economy and, more importantly, for implementing national reforms, the government said.

 

What actually are the treasury reserves? According to the Treasury Reserve Act of 1948, it refers to all money earned by the government through taxes, fees, fines, loans and other forms of revenue. The Kasikorn Thai Research Centre defines it as “cash or its substitutes available for government use for implementing state work”. This refers to revenue that is a surplus from the money allocated for government spending at a certain period of time.

 

Full story:  http://www.nationmultimedia.com/news/national/30305955

 

-- © Copyright The Nation 2017-02-09

[chiang mai]

A picture is worth a thousand words:

 

 

http://www.bb.go.th/budget_book/e-Book2559/FILEROOM/CABILIBRARY59/DRAWER01/GENERAL/DATA0000/inBrief2016.pdf

 

 

Edited February 8, 2017 by chiang mai

[retarius]

3 hours ago, chiang mai said:

A picture is worth a thousand words:

 

 

http://www.bb.go.th/budget_book/e-Book2559/FILEROOM/CABILIBRARY59/DRAWER01/GENERAL/DATA0000/inBrief2016.pdf

 

 

But look at the magnitude of the balance. peaks at 400, 500, 550, 600 and recent troughs at 150 and 200.

Edited February 9, 2017 by retarius

[spidermike007]

3 hours ago, chiang mai said:

A picture is worth a thousand words:

 

 

http://www.bb.go.th/budget_book/e-Book2559/FILEROOM/CABILIBRARY59/DRAWER01/GENERAL/DATA0000/inBrief2016.pdf

 

 

 

I believe several of those years were during the harebrained rice pledging scheme. Let us pay the farmers a price that is 40% above the world market, and then warehouse the rice until it goes bad. Woops. The treasury is down to 50 billion. OK, holds back the checks until we collect some more money. That was how noluck ran the economy during her reign. 

[chiang mai]

4 minutes ago, retarius said:

But look at the magnitude of the balance. peaks at 400, 500, 550, 600 and troughs at 

I guess that's what the pattern of income and expense is every year, mostly it reflects the extent to which unbudgeted money is spent every year on either stimulating the economy or bailing at different groups for different reasons.

 

It's perhaps worth noting that in the budget for 2016, the decision was made to fund the Treasury Reserves by a whopping 67% less than the previous year which should certainly reduce the magnitude of the swings.

Edited February 9, 2017 by chiang mai

[jpinx]

Unless I am mistaken (quite possible) Do these figures show that Thailand has an annual surplus?  Or am I missing something?

[chiang mai]

Just now, jpinx said:

Unless I am mistaken (quite possible) Do these figures show that Thailand has an annual surplus?  Or am I missing something?

That graph is just the Treasury Reserve account it is not the annual budget.

[jacko45k]

Interest burden..... it isn't much of a burden to banks to give me 0.5%!!!

[chiang mai]

1 minute ago, jacko45k said:

Interest burden..... it isn't much of a burden to banks to give me 0.5%!!!

Loans of 450 billion baht tend to attract a higher rate of interest that must be PAID than the interest rate that is RECEIVED on the average monthly pension amount!

 

[Eric Loh]

Bottom line, falling treasury reserves, increasing budget deficits and more borrowings by the junta government are bad for the country and a burden for the tax payers and generations to come. More so when you have a junta government that lacks transparency and accountability and threaten people that ask too much difficult questions. Nothing good when you spend more than you earn especially at this time when the exports and domestic economy are weak and those are our major key economic engines. The global uncertainty and softness will persist for a long while and we need better financial discipline and accountability; not from this unelected junta government. 

[Brer Fox]

The budget deficit for 2015/16 was 390 billion baht. That has probably well and truly blown out by now. Just assuming the deficit was still 390 billion baht and the cash reserves are what they are now at 74.9 billion baht then in theory Thailand as at this moment is broke to the tune of 315.1 billion baht. Not suggesting that is a dire situation because it can be financed in the normal way by borrowings. It is the extent of the deficit for year end 2017 that could be the worrying number particularly if the cash reserves are what they are now or lower or even non existent.

 

[chiang mai]

5 minutes ago, Eric Loh said:

Bottom line, falling treasury reserves, increasing budget deficits and more borrowings by the junta government are bad for the country and a burden for the tax payers and generations to come. More so when you have a junta government that lacks transparency and accountability and threaten people that ask too much difficult questions. Nothing good when you spend more than you earn especially at this time when the exports and domestic economy are weak and those are our major key economic engines. The global uncertainty and softness will persist for a long while and we need better financial discipline and accountability; not from this unelected junta government. 

Have you bothered to even look at the historic graph of Treasury Reserve account balances over recent years, the current scenario is normal by historic comparison.

[chiang mai]

2 minutes ago, Brer Fox said:

The budget deficit for 2015/16 was 390 billion baht. That has probably well and truly blown out by now. Just assuming the deficit was still 390 billion baht and the cash reserves are what they are now at 74.9 billion baht then in theory Thailand as at this moment is broke to the tune of 315.1 billion baht. Not suggesting that is a dire situation because it can be financed in the normal way by borrowings. It is the extent of the deficit for year end 2017 that could be the worrying number particularly if the cash reserves are what they are now or lower or even non existent.

 

Nonsense, it's not as though all income is received on January 1st and there is nothing more to be had until one year later, income is derived daily weekly and monthly. So whilst the Treasury Reserve account may well be low on this date, which it is expected to be, income is still being received but not into that particular account. Also, when talking about being the country being broke, it's convenient to forget the USD 177 billion sat in Foreign Currency Reserves but I suppose remembering it doesn't support your theory!.

[Eric Loh]

4 minutes ago, chiang mai said:

Have you bothered to even look at the historic graph of Treasury Reserve account balances over recent years, the current scenario is normal by historic comparison.

Nothing unusual about the graph that showed vertices, lines and nodes for a year. What do you want me to look at? I only see withdrawals during the years which are normal but replenished by tax and revenues so that by the end of the year it give a end year nett reserve. 

[chiang mai]

Just now, Eric Loh said:

Nothing unusual about the graph that showed vertices, lines and nodes for a year. What do you want me to look at? I only see withdrawals during the years which are normal but replenished by tax and revenues so that by the end of the year it give a end year nett reserve. 

It's just that your statement about falling Treasury Reserves makes it appear as though there's a problem, there isn't.

[jpinx]

Not quite the same yardstick, but interesting nevertheless....

 

[Brer Fox]

3 minutes ago, chiang mai said:

Nonsense, it's not as though all income is received on January 1st and there is nothing more to be had until one year later, income is derived daily weekly and monthly. So whilst the Treasury Reserve account may well be low on this date, which it is expected to be, income is still being received but not into that particular account. Also, when talking about being the country being broke, it's convenient to forget the USD 177 billion sat in Foreign Currency Reserves but I suppose remembering it doesn't support your theory!.

As the great defender of the junta you find it convenient not to read other's posts properly. I said it was a theoretical calculation. Not an actual one. I also implied it was not a problem. What has Jan 1st go to do with the debate? Where is the evidence of any Foreign Currency Reserves right at this moment? These supposed reserves seem to go up and down with the blink of an eye depending on whether they need cash for deposits on submarines, tanks or combat aircraft. Even if that claimed 177 billion did exist then again in theory Thailand would be broke  by 138 billion baht which is peanuts in the scheme of things. 

[Eric Loh]

8 minutes ago, chiang mai said:

Nonsense, it's not as though all income is received on January 1st and there is nothing more to be had until one year later, income is derived daily weekly and monthly. So whilst the Treasury Reserve account may well be low on this date, which it is expected to be, income is still being received but not into that particular account. Also, when talking about being the country being broke, it's convenient to forget the USD 177 billion sat in Foreign Currency Reserves but I suppose remembering it doesn't support your theory!.

No one saying the country is broke. In fact, Thailand financial standing at this point of time is excellent. BBB+ credit rating, huge foreign reserves and strong current account. Just that this are backwards looking data. Looking forward if we don't curb spending and our large infrastructure project got problems with cost overrun, our exports weak and domestic economy soft, we are heading for economic problems. The country is bleeding money with less tax and revenues collected and with little FDI, we wouldn't be generating tax and revenues for years to come. Should the country runs out of money to pay our loans, we will have a repeat of 1997 and we will have to use our foreign reserves to support the Baht strength. Look forward not backwards. We are heading into stormy weather.

[chiang mai]

Just now, Brer Fox said:

As the great defender of the junta you find it convenient not to read other's posts properly. I said it was a theoretical calculation. Not an actual one. I also implied it was not a problem. What has Jan 1st go to do with the debate? Where is the evidence of any Foreign Currency Reserves right at this moment? These supposed reserves seem to go up and down with the blink of an eye depending on whether they need cash for deposits on submarines, tanks or combat aircraft. Even if that claimed 177 billion did exist then again in theory Thailand would be broke  by 138 billion baht which is peanuts in the scheme of things. 

You can put your defender statement you know where, this is not about defending anyone, it's about presenting a balanced argument based on fact rather than rumour heresy and wish. Just look back at the original thread on the subject of depleted Treasury Reserves, two pages of posters ranting about theft, corruption and mismanagement, only to find out later that the Treasury balances are in fact normal. It's that picture that's being defended, not people individual or governments and if you can't get your head around that point and sign on to the concept then you and I have nothing worth discussing with each other.

[chiang mai]

4 minutes ago, Eric Loh said:

No one saying the country is broke. In fact, Thailand financial standing at this point of time is excellent. BBB+ credit rating, huge foreign reserves and strong current account. Just that this are backwards looking data. Looking forward if we don't curb spending and our large infrastructure project got problems with cost overrun, our exports weak and domestic economy soft, we are heading for economic problems. The country is bleeding money with less tax and revenues collected and with little FDI, we wouldn't be generating tax and revenues for years to come. Should the country runs out of money to pay our loans, we will have a repeat of 1997 and we will have to use our foreign reserves to support the Baht strength. Look forward not backwards. We are heading into stormy weather.

Government spending is 44% of GDP, there is plenty of scope to expand it with infrastructure building and stimulation of the economy, loads of scope.

 

 

 

 

 

[Eric Loh]

 

 

1 minute ago, chiang mai said:

You can put your defender statement you know where, this is not about defending anyone, it's about presenting a balanced argument based on fact rather than rumour heresy and wish. Just look back at the original thread on the subject of depleted Treasury Reserves, two pages of posters ranting about theft, corruption and mismanagement, only to find out later that the Treasury balances are in fact normal. It's that picture that's being defended, not people individual or governments and if you can't get your head around that point and sign on to the concept then you and I have nothing worth discussing with each other.

The great junta defender say it is normal to spend 85% of last year reserves when the government continue to borrow at alarming numbers and the budget deficit is the highest compare previous governments. There wouldn't be sufficient tax and revenues from a deteriorating domestic economy and weak exports and the projects costs going up and completion in doubt and no FDI means no revenue and tax. The junta government has already said they will keep a new balance in the reserves which literally say they have no money to replenish the reserves. Wake up and smell the roses and it is not pretty.

[Eric Loh]

3 minutes ago, chiang mai said:

Government spending is 44% of GDP, there is plenty of scope to expand it with infrastructure building and stimulation of the economy, loads of scope.

 

 

 

 

 

Ya, more borrowings. 

[chiang mai]

Just now, Eric Loh said:

 

 

The great junta defender say it is normal to spend 85% of last year reserves when the government continue to borrow at alarming numbers and the budget deficit is the highest compare previous governments. There wouldn't be sufficient tax and revenues from a deteriorating domestic economy and weak exports and the projects costs going up and completion in doubt and no FDI means no revenue and tax. The junta government has already said they will keep a new balance in the reserves which literally say they have no money to replenish the reserves. Wake up and smell the roses and it is not pretty.

Good bye Eric, we're done.

[KhunBN]

So what does this mean for farangs in Thai? More specifically, will it affect the Thai currency?

 

Can any kind person explain the effects of low treasury reserve? Sorry, my economic knowledge is not that great.

[chiang mai]

1 minute ago, KhunBN said:

So what does this mean for farangs in Thai? More specifically, will it affect the Thai currency?

 

Can any kind person explain the effects of low treasury reserve? Sorry, my economic knowledge is not that great.

There is zero impact on the Thai Baht, none whatsoever.

 

The impact of low Treasury Reserves is also zero impact, it's normal by historical standards.

[Enoon]

1 hour ago, spidermike007 said:

 

I believe several of those years were during the harebrained rice pledging scheme. Let us pay the farmers a price that is 40% above the world market, and then warehouse the rice until it goes bad. Woops. The treasury is down to 50 billion. OK, holds back the checks until we collect some more money. That was how noluck ran the economy during her reign. 

 

So, business as usual.

 

 

[The Deerhunter]

1 hour ago, chiang mai said:

Have you bothered to even look at the historic graph of Treasury Reserve account balances over recent years, the current scenario is normal by historic comparison.

Of course he hasn't.  Saying it was normal wouldn't help rehabilitate Mr Thaksin's or his sister's status one iota.  Selective memory too.  Because, neither would it  begin to help explain how many billions of baht went out of reserves in "unexpected payments" to  pay out and thereby rescue the destitute victims of the last elected government's rice scam.  Her government  had made absolutely no budgetary or other provision whatsoever to pay out on these promises, right up to the time that it was dissolved and the rice payments were therefore one of the first challenges facing the junta.  This was a huge, immediately necessary, unbudgeted financial outlay.  It was only a couple of years ago and  I would expect the reverberations are still echoing through the halls of the finance ministry, even today.  I am surprised that they could balance the books in any fashion for that first year or two.

Edited February 9, 2017 by The Deerhunter
clarify

[smutcakes]

There is a decent article in the opinion piece of the BKP website which appears to ask some legitimate questions of this situation without getting all political about it.

[KhunBN]

10 minutes ago, chiang mai said:

There is zero impact on the Thai Baht, none whatsoever.

 

The impact of low Treasury Reserves is also zero impact, it's normal by historical standards.

 

Why are the media and people making a big fuss if it's normal with no impact by historical data unless, they are not aware of this themselves? 

[Srikcir]

5 hours ago, webfact said:

the existing reserves were appropriate, as the country did not need to borrow, which in turn would lead to an interest burden

I guess we'll know the truth when the FY 2018 budget (Oct. 1, 2017-Sept. 31, 2018) is submitted in May 2017.

 

What is not so clear is what the deficit is now for FY2017 budget (Oct. 1, 2016-Sept. 31, 2017). DPM Somkid said last month "that deficit budget is still necessary as the country’s expenditure budget this fiscal year is estimated at 2.9 trillion baht with 450 billion baht in deficit."  http://englishnews.thaipbs.or.th/government-approves-deficit-budget-2017-fiscal-year/ 

 

So the deficit is no longer 390 billion baht passed by the NLA for FY 2017.