PDMO eyes debt payment adjustment
The Public Debt Management Office (PDMO) has proposed reworking the principal payment to at least 2% of the government debt obligation, aiming to pay it off within 50 years.
The proposal is based on the concept that debt incurred during a generation should be paid off within that time frame, allowing for more borrowing when new investment is required down the road, said Theeraj Athanavanich, a bond market adviser to the PDMO.
Even if the proposal is approved, it does not mean all public debt will be paid off in the next 50 years as governments typically accumulate debt over time, he said.
Moreover, related debt obligations consist of direct liabilities and state enterprise debt guaranteed by the government, which forms a part of outstanding public debt. Total public debt, therefore, will not be paid off even if the government does not take on more obligations, said Mr Theeraj.
The country’s outstanding public debt totalled 6.46 trillion baht, representing 41.3% of GDP at the end of February, while the government debt obligation was 4.59 trillion.
At present, the government is required to allocate 1-2% of the annual budget to pay down the debt principal. But funds from that budget are the only source for the government to pay the interest rate.
The 2% of the government debt obligation is typically equivalent to 3% of the annual budget, he said, adding that setting the public debt principal payment at a low level could ramp up debt liabilities and later affect the government’s cash flow.
Mr Theeraj said approval for the proposal will be sought from the committee on fiscal discipline, chaired by Prime Minister Prayut Chan-o-cha. The committee is responsible for setting the public debt payment.
The draft on the Fiscal Responsibility Act, which was approved by the National Legislative Assembly and is pending the royal endorsement, entails a wide framework for debt principal payment.
He said setting the debt principal payment ratio based on the annual budget is an issue that has long been debated.