No time to wait for Thai fiscal reform

The daunting mission of the four-month-old government led by Prime Minister Anutin Charnvirakul is to revive an economy that has been sluggish for a long time. Can the Anutin government deliver? After all, tackling “bread-and-butter” issues requires fiscal sustainability.

- Wichit Chantanusornsiri

At the same time, the government's fiscal position shows clear signs that reform is much needed to make it sustainable. Without fiscal resilience, the government will not be able to pay for its own expenditures.

The government's fiscal reform has long been a subject of discussion. What is so worrying is that our government spending just keeps on rising and rising. Our government's spending lists are being laden with recurrent expenses such as civil servants’ salaries, healthcare benefits for civil servants, the universal healthcare scheme or the 30-baht healthcare programme, monthly allowances for the elderly, as well as a plethora of “electoral pledges” — populist projects, if you will.

So, how can the government find the money? The growing expenditures have forced the government to borrow more, breeding more public debt — a precursor of more problems such as reduction in private investment and financial instability.

The level of our public debt figure is disturbing. As of July, the public debt-to-GDP ratio stood at 64.49%. If economic growth remains below 3% in the coming few years, the public debt ratio could soon hit the stability ceiling of 70% of GDP.

DIRE NEED FOR REFORM

The government and responsible state bodies have acknowledged the need for fiscal reform. This year is the first time the Fiscal Policy Office (FPO) has held a seminar under the theme of fiscal transformation. Needless to say, this serves as an explicit call for fiscal reform.

It strongly emphasised the urgent need to reduce the budget deficit, keeping it at no more than 3% of GDP, to support sustainable economic development.

Since the 1997 “Tom Yum Kung crisis’, Thailand has run deficit budgets almost every year, with only 2005 and 2006 serving as exceptions.