BANGKOK (Reuters) – Thailand has received a green light to borrow to finance its controversial 500 billion baht ($14.29 billion) digital handout scheme, a senior official said on Monday, in a boost to a government eager to stimulate a sluggish economy.
The Office of the Council of State, an independent panel that provides legal guidance to governments, had found no reason that would prohibit borrowing from the state budget to fund the plan, deputy finance minister Julapun Amornvivat said.
The programme to give away 10,000 baht to 50 million Thais to spend in their local communities was the signature election policy of the ruling Pheu Thai party.
The government is seeking to spur growth in Southeast Asia’s second biggest economy largely though stimulus and consumer spending, with Thailand trailing regional peers with growth forecast at about 2.4% last year, short of the 2022 figure.
The “digital wallet” plan has come under fire from economists and some former central bank governors who say it could be fiscally irresponsible and fuel inflation.
The government last year sought the Council of State’s advice on the legality of borrowing for the programme.
The government has insisted it will be managed carefully and be a big boost to the economy, which Julapun said was in crisis. The government would cascade its borrowing to fund the handout, he told reporters, adding the government would stick to its plan to roll out the scheme in May.
The announcement came as Prime Minister Srettha Thavisin, who is also finance minister, urged the central bank on Monday to consider cutting interest rates as inflation was very low.
He said he planned to speak to its governor to urge him to reconsider its policy stance.
“We’ve talked all the time. On raising interest rates, I have a clear stance that I don’t agree with, but he has the power to increase it,” Srettha told reporters.
Inflation was very low, “therefore, there may be a need to consider reducing interest rates”, he said.
The central bank left its policy rate unchanged at a decade high of 2.50% in November after raising it by 200 basis points since August 2022 to curb inflation. It will next review policy on Feb. 7.
Headline inflation came in at -0.83% in December, making it the eighth straight month that it was outside the central bank’s target of 1% to 3%.
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