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25 February 2014
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Steps on budgetary loopholes suggested

Erich Parpart

ADDED TRANSPARENCY and contingent liability are needed to serve as extra checks and balances on the government’s off-budget loans to improve the government’s financial and budgetary discipline, according to the Thailand Development Research Institute.

“Laws that limit government loans and prohibit the government from spending more than its revenue usually do not work because there are loopholes.

“There is a need to create special regulations and institutions whose responsibility is to provide transparency and information on government spending to the public,” Nipon Poapongsakorn, director of the Sectoral Economic Programme on Industrial and Rural Development Policy at the TDRI, said yesterday.

The loopholes, which have led to huge public debt, have to be plugged through both parliament and cabinet approval while the introduction of institutions such as the Parliamentary Budget Office (PBO) is needed to enhance government budgetary discipline, he said.

Transparency and added contingent liability through regular and annual reports is also needed to show the public what governments are using their loans and budgets for and how effective their projects really are.

Transparency in accounting for each government loan, especially for off-budget loans, is needed in order for independent organisations, such as the Auditor-General’s Office, to be able to check how budgets and loans are being used and their effectiveness.

Projects that are being funded by the government from off-budget loans should file a report with a timeline indicating how long it would take to finish and a list of the sources of money that are funding the project. And, if the project is losing money, the government should be able to indicate how or where it is going to get extra funds from to support the project.

Biggest problem

The biggest problem in government financial discipline is its off-budget loans, which do not need the approval of parliament, only the cabinet.

“Government off-budget loans to support populist policies are creating the problem of high public debt and they should be put under control by adding measures such as mandatory approval from parliament and transparency in their financial accounting,” he added.

Somchai Jitsuchon, director of inclusive development research, said the problem of government financial discipline is embedded within the structure because of the imbalance between government income and expenditures.

Thailand’s system of tax collection is insufficient because of structural problems, he said.

According to the international standard, a wealth tax should be the main source of government income through taxation, followed by income taxes and then taxes on goods and services.

In Thailand, it’s the opposite case, which causes the imbalance and the shortage of investment budgets for the future, which forces or encourages the government to turn to off-budget loans to invest for the future.

Regular and annual “public reports” with easy-to-understand information on the government’s projects and fiscal policy is needed to prevent alienation of the people from the government’s policy and its plans.

A report on government annual spending should be made and publicised three months before the first parliamentary meeting of each year to provide the public time to produce vetoes and give voice to the government’s plans for the country’s future.


First published: The Nation,  February 25, 2014


Nipon Poapongsakorn, Ph.D.
Distinguished Fellow
Somchai Jitsuchon, Ph.D.
Research Director, Inclusive Development