Is the government’s 400-bn-baht emergency loan an economic exigency?

Thailand’s Cabinet recently issued an Emergency Decree to borrow 400 billion baht, aimed at funding relief and economic restructuring amid the global energy crisis stemming from the war in Iran.

The first portion, totaling 200 billion baht, will fund relief co-payments to around 30 million people at 4,000 baht per person, top‑up the state welfare card catering to 13.4 million low‑income citizens, and also support the transport sector.

The remaining 200 billion baht will finance economic restructuring projects, including the transition to clean energy and improving the productivity of Thai labour, among other initiatives.

This new borrowing is projected to push public debt close to 70 per cent of gross domestic product (GDP), the revised fiscal discipline ceiling, raised from the previous 60 per cent. A higher public debt level limits the fiscal space available to respond to future economic problems.

Concerns over transparency and legality

Opposition politicians have raised concerns, particularly over the lack of detail on specific energy transition projects that the government plans to fund through the emergency loan.

The opposition, led by the People’s Party, has asked the House Speaker to forward its petition to the Constitutional Court for a ruling on whether the Emergency Decree violates the Constitution.

They argue that the second 200 billion baht tranche for energy transition projects does not constitute an emergency and could instead be funded through the annual budget process.

“Opposition parties want the Constitutional Court to decide on whether the 400 billion-baht emergency decree is in line with Article 172 of the Constitution,” said Natthaphong Ruengpanyawut, leader of the People’s Party.

Article 172 allows the Cabinet to issue an Emergency Decree when it is deemed necessary to maintain national security, public safety, national economic security, or to avert a public calamity.

Natthaphong argues that the energy transition is a long term process and Thailand already has tools such as the Power Development Plan to address it.

He also contends that even the first 200 billion baht earmarked for economic relief could have been managed via the regular budget bill or through other measures, such as excise tax cuts.

Government’s defence

Prime Minister Anutin Charnvirakul has countered that his was not the first government to resort to borrowing through an Emergency Decree. Without taking names, Anutin noted that previous administrations also had raised funds this way, for example, to finance the “Thai Khem Khaeng” (Strong Thailand) relief package under the Democrat administration following the 2008 global financial crisis.

Korn Chatikavanij, deputy leader of the Democrat Party, argued that compared with the emergency fund raising during the 1997 Asian financial crisis, the 2008–2009 “Hamburger crisis” and the 2020 COVID 19 pandemic, the Anutin administration’s 400 billion baht loan does not meet the test of urgency.

Impact on economy

A prominent economist believes the overall impact on the economy will be limited.

Supavud Saicheua, an economist and advisor at Kiatnakin Phatra Financial Group, said the 200 billion baht in relief money for the public can be disbursed quickly in the third quarter of this year, which would be appropriate because that is when the economy typically slows down seasonally due to fewer foreign tourists and the rainy season.

However, the other 200 billion baht must be allocated to projects proposed by government agencies and screened by a committee chaired by the permanent secretary of the Ministry of Finance. Approving what will likely be hundreds of projects will take many months, so the funds will probably be disbursed gradually toward the end of this year and the next year.

He added that the 400 billion baht accounts for only about 2 per cent of GDP, which is relatively small compared with the budgets and deficits during the COVID 19 outbreak. It is also modest when set against predictions that inflation will reach 3 per cent this year, meaning the purchasing power of the 400 billion baht will fall by 3 per cent, or 12 billion baht.

By contrast, Thailand imported energy worth 1.3 trillion baht last year, when Brent crude averaged US$72 per barrel. This year, Brent is likely to average around $92 per barrel.

That implies energy imports will rise to about 1.67 trillion baht, an increase of around 370 billion baht from last year, which would be money flowing out of the country and reducing GDP.

When evaluated against the scale of the energy challenges Thailand will face in 2026, the 400 billion baht the government will raise is not a very large amount, according to Supavud.