'Merits of govt debt depends on how it's used' - The Nation

Home ? business ? 'Merits of govt debt depends on how it's used'

THE NATION October 13, 2012 1:00 am

Are you concerned with the current level of public debts if they include off-balance-sheet deficits in fiscal years 2013 and 2014? The Cabinet on October 9 approved public debt management for fiscal year 2013 with planned borrowing of Bt950 billion. This will raise the country's ratio of public debt to gross domestic product to nearly 49 per cent, close to the level during the 1997 Asian financial crisis. This has raised concern as Thailand moves in the opposite direction of Western countries facing financial crisis and attempting to lower their budget deficits and levels of public debt.

It depends on what the borrowing will be used for. If people feel that the government uses it to finance useful projects that strengthen the nation's economy and competitiveness, this will yield returns in the future. There might be no problems in economic and social issues. Foreigners keep an eye on not only GDP, but also the public debt level.

In the past some units, such as the National Economic and Social Development Board and the Budget Bureau, would ask questions when the government over-borrowed. Why aren't there any units doing this?

I have also questioned the government agencies on what they are doing. Both good and bad debts arise when the government takes off-budget loans. The off-budget debts are incurred without Parliament's scrutiny despite the lack of urgency to do so. This is against fiscal discipline. However, I haven't heard any comment from the Ministry of Finance's permanent secretary or any directors-general. I think there is a fearful environment. Thus we perform our duty as the opposition.

This does not include the Bt2.27-trillion budget the government plans to invest in infrastructure and mega-projects in the next four to five years. Are these worthwhile investments amid the gloomy global economic situation?

If the projects are executed efficiently, they are worth investing in.

When borrowing is done off-balance-sheet, it avoids parliamentary oversight.

Normally, projects are proposed in detail to the Budget Committee for consideration, if they run through the budgetary process. All of the disbursement plans are outlined in detail. Budget monitoring is done. However, the emergency decree allows the government to borrow without the parliamentary process.

Will we confront problems in the future, as many have started warning, if we do much more public borrowing?

If the current government does this, the next government may have to solve a crisis. It's not only figures, not only public debt to GDP. Japan's public-debt level has stayed over 200 per cent of its GDP and the country is still in a good shape. It also depends on the confidence in the economy, the government's policies, the efficiency of policy implementation and the level of corruption.

If you become finance minister again, will you raise taxes?

I raised taxes in the first six months after I took that government office. We had a real crisis, and government revenue was expected to be below target. We borrowed first and increased taxes second. Then we increased excise taxes on all types of fuel. The opposition at the time, certainly, criticised us. However, when the economy recovered, we lowered those taxes. Therefore, we need to be brave to do the right things.

The International Monetary Fund has said China, Malaysia and Thailand have depended too much on exchange-rate policy, compared with the medium-term fundamentals. The IMF suggested these countries use fiscal stimulus instead to stimulate exports. What do you think about this?

Previously, Thailand followed its regional peers. Now, the country has been entering an investment period, and it may need a stronger currency, allowing Thai people to pay less for imports. Inflationary issues could be reduced. However, our exports might find it more difficult to compete. We need to have a clear strategy to find a balance.

What will likely happen with the fiscal stance and the Thai rice industry if the pledging scheme continues? Does this scheme raise farmers' incomes?

I see this as the worst among all of the governments' policies. This scheme does raise farmers' incomes. However, according to academic research, for every Bt100 the government spends on this scheme, farmers gain only Bt30. This indicates inefficiency in helping farmers. On another point, this project suffered a loss of about Bt150 billion in the first year of implementation because of the differential of rice prices and administrative costs.

Latest stories in this category

Source: http://www.nationmultimedia.com/business/Merits-of-govt-debt-depends-on-how-its-used-30192256.html

divine mercy cabin in the woods the legend of korra three stooges the three stooges the bee gees woodward