Financing FY 2026 deficit will fall short

My message is short, loud and clear. There will not be enough money to finance FY 2026's 860 billion baht budget deficit. Without enough money, the budget will collapse and take the economy down with it.

- Chartchai Parasuk

The government is learning the bitter lesson of drying up finance sources now, but budget financing will be in crisis in the 2026 fiscal year.

It is a false belief that any government can easily fund its deficit by issuing bonds, as public bonds are the safest investment instruments in any country. In fact, economic theory has a term, "crowding out", which is when private credit expansion is curtailed as it cannot compete with government bonds. However, Japan's experience depicts a different story.

Japanese governments have been running large fiscal deficits since 1993. As of 2025, the government has total debt of 263% of GDP. I used to naively think that Japanese pension funds held most of the bonds. I could not be more wrong. The fact is the Bank of Japan (BoJ) holds 53% of bonds outstanding, which means the bank prints money to purchase government bonds.

The reason is simple. The economy cannot produce enough yen money to constantly purchase government debt. Then, the BoJ jumps into to save the day by buying up unsold bonds. However, this nasty practice does not come without a cost. The cost is inflation and depreciation of the currency. Outsiders might view this practice as a positive move, as a weak yen would boost exports and tourism. Japanese consumers, however, viewed this as a killer because the inflation rate rose to 3.6%.

If the Japanese economy does not have enough yen to support the government deficit, why would the Thai economy have enough baht to support the government deficit?

It is arguable that Thai government debt is relatively small compared to Japan's. But bear in mind the Thai economy is far weaker and far smaller than Japan's economy, not to men-tion Japan's solid saving base. A few years of continued large fiscal deficits would take the Thai economy to the limit.

Please take a look at the history of Thai fiscal deficits and their financing presented in the table.