Key insights
- Thailand's government is borrowing $6.13 billion to fund consumer subsidies aimed at mitigating the impact of the Middle East war on living costs. While intended to support the economy, the increased borrowing raises the public debt-to-GDP ratio, signaling potential fiscal strain. This could indirectly impact global markets by influencing investor sentiment towards emerging market debt and economic stability.
BANGKOK, May 19 (Reuters) - Thailand’s cabinet has approved new borrowing of 200 billion baht ($6.13 billion) to support a consumer subsidy scheme, Finance Minister Ekniti Nitithanprapas said on Tuesday, part of the government’s efforts to alleviate the impact of the Middle East war on the cost of living.
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The scheme will cover about 43 million people over four months, the finance ministry’s permanent secretary Lavaron Sangsnit said at a press conference.
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The government will offer 1,000 baht ($30.68) per person per month from June to September.
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The government will subsidise 60% of the prices of certain consumer goods, capped at 200 baht per day.
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The borrowing will not be a one-time loan, but will be done gradually to cover the costs of the subsidy, he said.
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The 200 billion baht will be raised through term loans and promissory notes at interest rates below 1.5%, with market liquidity ample, Jindarat Viriyataveekul, head of the Public Debt Management Office, told Reuters.
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The borrowing will raise the public debt-to-GDP ratio to about 68% by the end of September, remaining below the official ceiling of 70%, she said.
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The new borrowing is part of a 400 billion loan decree, which is facing a legal challenge.
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"The measure is necessary because if we leave the economic crisis to go on, businesses will close, people will lose their jobs and the economy will sink for a long time," Ekniti said.
($1 = 32.6000 baht)