Latest government Covid borrowing pushes state funds to the limit, says bank research center

[webfact]

Picture: Naew Na

 

Naew Na reported the views of the Kasikorn Thai research center concerning the government's latest 700 billion baht borrowing plan.

 

Kasikorn said that the latest loan would push Thailand's borrowing to the very limit of the 60% threshold of GDP. 

 

It follows a trillion baht package of measures that saw borrowing account for 54.3% of GDP at the end of March. 

 

The current loan makes it 59.6% by the end of the year.

 

That is all very well and within limits IF the Covid situation stabilizes, they said. 

 

But the government would need to change the rules and go beyond 60% of GDP if the situation worsened and they decided to borrow more. 

 

With the Covid pandemic being one surprise after another Naew Na reported that government borrowing was now stretched to the absolute limit. 

 

-- © Copyright Thai Visa News 2021-05-21

 

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[ThailandRyan]

Time to take a hammer to Prayut and companies piggy banks and for the BOT to open up the Cash Reserves...

[RotBenz8888]

Given the 100s of million tourists waiting for the boarders to open, why worry? 

[Fex Bluse]

Pen about to drop. State is running low on money. THAI debacle and tourists not coming in large numbers for at least 2 full years and possibly 3 is going to expose all these farmers in suits.

[KhunBENQ]

Compare to Germany. "black zero", saving/cutting, neglect infrastructure for years, being the prig of the Eurozone.

Now throwing all over board, let the 100s of billions fly.

 

Is it selfish that this thread lets me check the exchange rates again?

[holy cow cm]

Now watch the guarantee of funds for bank account limit to drop to 500,000 from the next limit of 1000,000. These state owned banks could have a field day.

[Surelynot]

Just change the limit....problem solved.....doh!

[worgeordie]

I thought they had billions and billions of foreign currencies

in deposit ,down in the vaults, someone been down and had

a look ....and it's not there ? when the Central bank puts out 

reports that everything in the Thai banking system is safe as

houses ????........

regards Worgeordie

[RichardColeman]

Sounds like time to double the retirement savings for visa requirements !

[ThailandRyan]

17 minutes ago, RichardColeman said:

Sounds like time to double the retirement savings for visa requirements !

Hmmm, do not give them any ideas....

[hotchilli]

4 hours ago, ThailandRyan said:

Time to take a hammer to Prayut and companies piggy banks and for the BOT to open up the Cash Reserves...

I think the reserves have already been plundered... why do you think Prayut can't afford to purchase vaccines?

[AlfHuy]

Cancel the purchase of the submarines (refund the commission which was probably received)

Repatriate all black money.

Ploplem solved.

[DPKANKAN]

4 hours ago, ThailandRyan said:

Time to take a hammer to Prayut and companies piggy banks and for the BOT to open up the Cash Reserves...

Or cancel a few submarine orders!!!!????????????????

[Cake Monster]

4 hours ago, webfact said:

But the government would need to change the rules and go beyond 60% of GDP if the situation worsened and they decided to borrow more. 

I am not so sure that it is as simple as this to do.

Was the 60 % limit of GDP not enforced upon Thailand after the last Asian Financial crash back in 1997.

Rightly or wrongly, ( and I am sure I will be corrected if wrong ) I thought the 60 % of GDP figure was imposed by the World Bank, and IMF, due to the large part in the crash that Thailand played through poor lending against bad asset 

It was imposed to prevent this ever happening again 

[BritManToo]

4 hours ago, ThailandRyan said:

Time to take a hammer to Prayut and companies piggy banks and for the BOT to open up the Cash Reserves...

You think they really have cash reserves?

[BritManToo]

46 minutes ago, RichardColeman said:

Sounds like time to double the retirement savings for visa requirements !

I suspect that would just lose them 50% of foreigners on retirement extensions ...... so no net gain.

[trainman34014]

3 hours ago, worgeordie said:

I thought they had billions and billions of foreign currencies

in deposit ,down in the vaults, someone been down and had

a look ....and it's not there ? when the Central bank puts out 

reports that everything in the Thai banking system is safe as

houses ????........

regards Worgeordie

Probably shifted Offshore many years ago and is accruing interest for the most 'Important People' right now !

[NB1986]

If you look EU is long way off Thailand...no need to speak more about other countries like USA etc...its the same story. So Thailands 60% is actually still lower than Euro zone average...

Edited May 21, 2021 by NB1986

[ukrules]

Exceptional times call for exceptional actions - they should deflate the currency a little and make all the Baht they need.

 

The Baht going down in value would also be a boon to exports. Just ignore what the US says.

[Brierley]

1 hour ago, Cake Monster said:

I am not so sure that it is as simple as this to do.

Was the 60 % limit of GDP not enforced upon Thailand after the last Asian Financial crash back in 1997.

Rightly or wrongly, ( and I am sure I will be corrected if wrong ) I thought the 60 % of GDP figure was imposed by the World Bank, and IMF, due to the large part in the crash that Thailand played through poor lending against bad asset 

It was imposed to prevent this ever happening again 

No, it wasn't enforced by anyone but its creation did come indirectly from the '97 crash. The Ministry of Finance came up with financial sustainability rules which they felt successive governments should adhere to in order to maintain economic stability. This was the finance people saying that the politicians should have operating parameters that they couldn't exceed. There's a long read here that explains it all.

 

 https://kuojs.lib.ku.ac.th/index.php/jems/article/download/2089/1100

 

[Brierley]

24 minutes ago, trainman34014 said:

Probably shifted Offshore many years ago and is accruing interest for the most 'Important People' right now !

The foreign currency reserves don't belong to the government, the government cannot touch them. They belong to the BOT and are used to guarantee trade and exports and to ensure currency stability.

[Bangkok Barry]

39 minutes ago, Brierley said:

The foreign currency reserves don't belong to the government, the government cannot touch them. They belong to the BOT and are used to guarantee trade and exports and to ensure currency stability.

 

Until the government, answerable to no-one at all, decides otherwise. I could say more as there is a precedent, but I'd be in danger of breaking TVF rules.

Edited May 21, 2021 by Bangkok Barry

[Brierley]

2 minutes ago, Bangkok Barry said:

 

Until the government, answerable to no-one at all, decides otherwise. I could say more as there is a precedent, but I'd be in danger of breaking TVF rules.

I hear you. It's important, I think, to remember that the BOT is independent, in the past that independence has been reaffirmed at the highest levels. It is not even remotely conceivable that any government could or would sequester those funds from BOT without their approval or from higher, it would result in a catastrophic outcome, socially, economically and militarily.

[Rookiescot]

30 minutes ago, Brierley said:

I hear you. It's important, I think, to remember that the BOT is independent, in the past that independence has been reaffirmed at the highest levels. It is not even remotely conceivable that any government could or would sequester those funds from BOT without their approval or from higher, it would result in a catastrophic outcome, socially, economically and militarily.

 

No central bank is independent of the government.

They may claim to be but in reality its a fiction.

[ThailandRyan]

17 minutes ago, Brierley said:

I hear you. It's important, I think, to remember that the BOT is independent, in the past that independence has been reaffirmed at the highest levels. It is not even remotely conceivable that any government could or would sequester those funds from BOT without their approval or from higher, it would result in a catastrophic outcome, socially, economically and militarily.

Unfortunately the BOT acts as the custodian for the Government and the Cabinet of the Ministry of Finance and the Government is who appoints the Governor of BOT.

 

https://www.bot.or.th/English/AboutBOT/RolesAndHistory/Pages/RolesAndResponsibility.aspx

 

The BOT provides banking facilities to the government in terms of depository and lending facilities for the Ministry of Finance, acts as the custodian for the government, acts as the representative of the government for investment in assets and FX, trades and transfers the bill of exchange, securities, and share certificate, and controls and oversees FX.  In additions, the BOT may provide banking facilities to the state enterprise or other government agencies. Moreover, the BOT acts as the registrar for the government bonds by acting as the government representative in purchasing and selling government bonds, paying principal and interest, or acts as the registrar of state enterprises, specialized financial institutions, or other government agencies.

 

https://www.bot.or.th/English/FinancialInstitutions/Scope/Documents/ScopeOfSupervision.pdf

The Bank of Thailand as appointed by the Ministry of Finance Specialized Financial Institutions (SFIs) SFIs are the state-owned financial institutions established with each specific law, whose duties are to serve the government policies in promoting economic development and supporting investment. They are under the Ministry of Finance's supervision and the Bank of Thailand is empowered from the Ministry of Finance to engage in examination in SFIs' performances and risks associated businesses. Thus, the results will be submitted to the Minister of Finance

 

The two are interlinked it would appear.

Thailand Foreign Exchange Reserves | 1960-2021 Data | 2022-2023 Forecast | Calendar (tradingeconomics.com)

In the event of a major global crisis, this is not a bad position to be in. With big surpluses, large foreign exchange reserves, manageable external debt, and public expenditures offset by tax revenues the government of Thailand can, if it wants to, raise lots of cash quickly and cheaply in a pinch.  You may notice this is somewhat of a Catch-22. The reason Thailand is afforded lower yields by capital markets is precisely because it doesn’t run deficits and has moderate debt. But if there is any time to dip into years of accrued fiscal good will, it is surely during a global pandemic that has choked off some of your economy’s main sources of revenue. The government of Thailand agreed, approving a 1.9 trillion baht rescue package in May (worth approximately $60 billion at the time, but due to the baht strengthening since then now closer to $63 billion). At around 10 percent of GDP, it is a sizable stimulus.

 

So any loans the Country needs comes from using the Cash reserves as collateral and the Loan comes from the BOT.  Total so far borrowed is in the Trillions, so one wonders how they expect to pay it back.  A major balancing act on the edge of a sword. 

[Bangkok Barry]

32 minutes ago, Brierley said:

I hear you. It's important, I think, to remember that the BOT is independent, in the past that independence has been reaffirmed at the highest levels. It is not even remotely conceivable that any government could or would sequester those funds from BOT without their approval or from higher, it would result in a catastrophic outcome, socially, economically and militarily.

 

 Not any government has overthrown a democratically elected government, changed the constitution to ensure the military influence cannot be muted, and taken the country to the very brink of economic catastrophe. I believe it is perfectly capable of breaking into the piggy bank. I cannot comment on the quite recent financial behaviour of someone at the very highest level.

[Brierley]

11 minutes ago, Rookiescot said:

 

No central bank is independent of the government.

They may claim to be but in reality its a fiction.

You are quite wrong on this point.

[Brierley]

1 hour ago, ThailandRyan said:

Unfortunately the BOT acts as the custodian for the Government and the Cabinet of the Ministry of Finance and the Government is who appoints the Governor of BOT.

 

https://www.bot.or.th/English/AboutBOT/RolesAndHistory/Pages/RolesAndResponsibility.aspx

 

The BOT provides banking facilities to the government in terms of depository and lending facilities for the Ministry of Finance, acts as the custodian for the government, acts as the representative of the government for investment in assets and FX, trades and transfers the bill of exchange, securities, and share certificate, and controls and oversees FX.  In additions, the BOT may provide banking facilities to the state enterprise or other government agencies. Moreover, the BOT acts as the registrar for the government bonds by acting as the government representative in purchasing and selling government bonds, paying principal and interest, or acts as the registrar of state enterprises, specialized financial institutions, or other government agencies.

 

https://www.bot.or.th/English/FinancialInstitutions/Scope/Documents/ScopeOfSupervision.pdf

The Bank of Thailand as appointed by the Ministry of Finance Specialized Financial Institutions (SFIs) SFIs are the state-owned financial institutions established with each specific law, whose duties are to serve the government policies in promoting economic development and supporting investment. They are under the Ministry of Finance's supervision and the Bank of Thailand is empowered from the Ministry of Finance to engage in examination in SFIs' performances and risks associated businesses. Thus, the results will be submitted to the Minister of Finance

 

The two are interlinked it would appear.

Thailand Foreign Exchange Reserves | 1960-2021 Data | 2022-2023 Forecast | Calendar (tradingeconomics.com)

In the event of a major global crisis, this is not a bad position to be in. With big surpluses, large foreign exchange reserves, manageable external debt, and public expenditures offset by tax revenues the government of Thailand can, if it wants to, raise lots of cash quickly and cheaply in a pinch.  You may notice this is somewhat of a Catch-22. The reason Thailand is afforded lower yields by capital markets is precisely because it doesn’t run deficits and has moderate debt. But if there is any time to dip into years of accrued fiscal good will, it is surely during a global pandemic that has choked off some of your economy’s main sources of revenue. The government of Thailand agreed, approving a 1.9 trillion baht rescue package in May (worth approximately $60 billion at the time, but due to the baht strengthening since then now closer to $63 billion). At around 10 percent of GDP, it is a sizable stimulus.

 

So any loans the Country needs comes from using the Cash reserves as collateral and the Loan comes from the BOT.  Total so far borrowed is in the Trillions, so one wonders how they expect to pay it back.  A major balancing act on the edge of a sword. 

Coming back to various out of context parts of Ryan's cut and paste explanation!

 

1) The BOT loan for covid bailout was not 1.9 trillion, in fact, government borrowed only 900 billion from BOT, the rest was sourced from the bond market.

 

2) you found the roles and responsibilities of the BOT page yet you didn't list what they are, if you would have done that you would see that government plays no part in many aspects of BOT's core functions, in which they are totally independent. Fore example, monetary policy and stability, managing banking facilities for financial institutions, establishing and supporting the payments system, managing and supporting the foreign exchange system and its controls, printing and issuing banknotes and other securities, etc etc etc. Where BOT does serve government is that the central bank is required to implement policy determined by government, that means in practice that BOT must create favorable economic conditions in which to implement those policies, along with the tools and instruments that are necessary.

 

3) Interest rates are determined by the MPC which is a function of BOT, not government. Exchange rates are a function of the FOREX market and IMF rules, the BOT serves to adjust the exchange rate accordingly, not at government whim and fancy. If it were any other way, international governments, the international FOREX market and international trading partners would have no confidence in the country and wouldn't do business here and THB would be worthless.

 

https://www.bot.or.th/English/AboutBOT/RolesAndHistory/pages/rolesandresponsibility.aspx#:~:text=The BOT provides banking facilities,of exchange%2C securities%2C and share

 

 

 

 

Edited May 21, 2021 by Brierley

[hotchilli]

19 hours ago, Fex Bluse said:

Pen about to drop. State is running low on money. THAI debacle and tourists not coming in large numbers for at least 2 full years and possibly 3 is going to expose all these farmers in suits.

Maybe the once full state coffers are not so full anymore... or they were never as full as they once stated?

[BestB]

If borrowed money was well spent to support people and businesses then it’s the right thing to do but all

the borrowed money seems to just disappear into a black hole