Financial and economic experts yesterday criticised the populist policies of the Yingluck government, saying it will surge the level of bad debts to an unacceptable level.
They were speaking at a seminar on the impact of the policies on the country’s economy, finances and fiscal budget. The seminar was organised by the board of commissioners of the Senate finance and banking and financial institutions yesterday.
MR Pridiyathorn Devakula, former deputy prime minister and finance minister, said that the public debt level was expected to increase sharply to about 60 per cent of gross domestic product (GDP) and may even hit the 80-per-cent level in 2019 if the government continued to pursue populist policies to achieve its political objective.
“I have high concerns about some populist policies, which do not fit in with the fundamental demand of the country as they will be a big burden on the government in the long term,” said Pridiyathorn.
He cited the rice-pledging scheme, which had been implemented in fiscal 2004-5 until 2011-12, and caused a net loss of Bt189.14 billion.
The government, however, decided to continue this rice-pledging measure for this fiscal year as one of its long-term policies.
“We estimate that if the government continues its rice-pledging policy till fiscal 2018-19, the government will lose Bt1.47 trillion. This will surge the level of public debt in the future,” he said.
Meanwhile, Nipon Poapongsakorn, senior fellow at the Thailand Development Research Institute (TDRI), said that the government had avoided the use of the budget but used contingent liability instead.
“If the government engages in more investment projects to support its populist policies, it would need to propose the sources of fund and how to generate income to cover the spending.
It is an issue of fiscal discipline and how to manage the country for sustainable growth,” he said.
Korbsak Phutrakul, executive vice president at Bangkok Bank, said that the country’s public debt level had increased significantly from 36 per cent of GDP in 2008 to 44 per cent last year.
Although, the ratio is still at an acceptable level, there were negative signs of it increasing steeply as the government is launching more populist projects that would pile up the public debt. Driven by populist policies, the country’s public debt level is expected to be nearly 80 per cent of GDP in the next five or six years from now.
Former finance minister Thirachai Phuvanatnaranubala suggested that the country enact a law to manage the country’s public debt by restricting the use of the government budget for such populist policies.
Such a law would require the government to declare to the public the source of funding for its populist campaigns. Parliament would also have the authority to control the government’s income and expenditure from populist campaigns similar to the fiscal cliff act of the US.
Au-Ari Unjanil, lecturer at Chulalongkorn University’s Law Faculty, agreed on the need to
have a law to manage the public debt.
The current Constitutional Law’s category 8 has already referred to the government’s financial and budget management.
First published in The Nation, 15 March 2013