Mr. Lawaron Saengsanit, Director of the Fiscal Policy Office and spokesperson for the Ministry of Finance, explained the issue of borrowing to compensate for the budget deficit through a loan agreement (Term loan) amounting to 20 billion baht, stating that this is a normal procedure of the Ministry of Finance to align with the flow of income and expenditure during various periods under appropriate costs and risks. In the past, the Ministry has borrowed to cover budget deficits in various forms such as government bonds, savings bonds, loan agreements, promissory notes, and treasury bills. There has been regular planning for borrowing and cash management among relevant agencies to ensure efficient and prudent operations.

The current borrowing through a loan agreement of 20 billion baht is part of the borrowing to cover the budget deficit carried over from the fiscal year 2019, amounting to 101.022 billion baht, from the total borrowing framework for the fiscal year 2019 of 450 billion baht. As of the end of January 2020, the Ministry of Finance has borrowed a total of 56.202 billion baht for the carryover, which includes 18.6 billion baht in government bonds, 17.602 billion baht in savings bonds, and the aforementioned loan agreement of 20 billion baht. This borrowing to cover the budget deficit is part of the public debt management plan for the fiscal year 2020, with the borrowing framework already approved by the Cabinet. Therefore, the various forms of borrowing by the Ministry of Finance are considered normal operations and do not indicate a poor financial status.

The government's financial position remains strong enough to support fiscal measures aimed at promoting the country's economic growth in the future, as evidenced by the cash balance of 316.370 billion baht at the end of January 2020. The current cash level has been managed for maximum efficiency, taking into account the government's income and expenditure flows and management costs, which is sufficient for the continuation of government policies and operates within the legal framework of fiscal discipline.

Mr. Chankrit Dechwithak, Assistant Minister to the Prime Minister, stated that according to the Royal Gazette, the borrowing to cover the budget deficit through a loan agreement (Term Loan) for the fiscal year 2020, the first time, aims to compensate for the budget deficit of the fiscal year 2019, which has extended the loan period beyond the end of the fiscal year. The borrowing agreement with Government Savings Bank and Krung Thai Bank totals 20 billion baht, with a loan term of 1 year and 6 months starting from December 25, 2019, and the principal repayment due on June 24, 2021, with an interest rate based on the 6-month Bangkok Interbank Offered Rate (BIBOR) announced by the Bank of Thailand, minus an average spread of 0.15019% per annum.

The government has set the budget for 2020 at 3.2 trillion baht, which is a continuous deficit budget aimed at enhancing the country's development. Most of the expenditure is for civil servant salaries, leaving no funds for investment in national development. Coupled with the volatile global economic situation, the country's economy is in a fragile state, necessitating the government's policies to counter the economic situation (Counter-Cyclical Fiscal Policy) focusing on investment for development, income generation, and maintaining economic stability, as well as accelerating investment in national infrastructure to enhance the country's competitiveness and increase the private sector's capacity for investment and employment.

“Borrowing to cover the budget deficit is therefore necessary and can be done; it is a normal practice. In the past, we have borrowed to cover budget deficits for many years to drive the economy, and financial institutions both domestically and internationally have expressed a strong desire for the government to borrow significant amounts because the government is highly stable. Additionally, interest rates in the market have recently decreased to relatively low levels, and the banking system has high liquidity, making it an opportune time to borrow from state financial institutions. I assure the public that even though we are preparing a deficit budget and need to borrow, the Ministry of Finance can manage it within strict fiscal discipline, and in the future, we will strive to prepare a balanced budget as soon as possible,” Mr. Chankrit stated.

SOURCE: www.thaipublica.org