Battered but not broke
Welfare delays fan the flames of pandemic panic, even as the coffers are far from depleted, write Wichit Chantanusornsiri, Lamonphet Apisitniran and Dusida Worrachaddejchai
Rumours and gossip are spiralling about the government going broke, spreading like wildfire both online and offline after delayed welfare and pension payments in September for elderly citizens and people with disabilities.
People aged 60 or older receive 600-1,000 baht in monthly welfare, while welfare for people with disabilities is about 800 baht per person per month.
The delay in state welfare given to the elderly and the disabled, normally sent out on the 10th of every month, lasted a week.
According to finance permanent secretary Prasong Poontaneat, the delay came about because the government’s calculation of the number of elderly did not match the existing number and budget allocation.
The government still has 300 billion baht in treasury reserves, and revenue collections for government agencies for fiscal 2020 are still in line with projections, though some departments have reported lower-than-expected revenue collection, Mr Prasong said.
Whether due to clerical errors or miscalculations, the government’s fiscal status has certainly been under much scrutiny, as the regressive tax policy hindering progressive revenue collection is exacerbated by borrowings and spending to alleviate the public’s plight during the coronavirus crisis.
Disbursement of the fiscal 2021 budget, which starts on Oct 1, is likely to be delayed because of the approval process in the House of Representatives, while the end of the debt moratorium measure and travel stimulus scheme next month signal an ill wind for what’s to come next.
SUFFICIENT FOR EXPENDITURE Although the fiscal 2021 budget bill could be delayed, government spending in the first quarter is expected to be no more than 800 billion baht for fiscal 2021, said Dechapiwat Na Songkhla, director of the Budget Bureau.
In case of a delay, the Budget Bureau has proposed that the cabinet request using the fiscal 2020 budget bill for a while.
If approved, one-fourth or about 800 billion baht worth of the fiscal 2020 budget would have been disbursed, Mr Dechapiwat said.
This would be sufficient for public expenditure covering civil servants’ salary, welfare for the disabled and elderly, and spending for investment projects that have signed contracts, he said.
For new investment projects, budget cannot be disbursed until the fiscal 2021 budget bill is announced and published in the Royal Gazette.
This will not affect government disbursement of new investment projects, due to the fact that the terms of reference and selection of private contractors will take around two months to complete, Mr Dechapiwat said.
By then, the fiscal 2021 budget will come into effect, he said.
Normally, the annual budget bill is promulgated on Oct 1 of every year.
However, because of the pandemic this year, the government has required every government agency to adjust budget plans by reducing unnecessary spending and allocating the sum into the central budget, he said. An amount worth 40 billion baht has been allocated into the central budget, which will require about a month for adjustment.
The announcement of the fiscal 2021 budget will be made once the adjustment process is completed as scheduled in October, Mr Dechapiwat said.
For fiscal 2021, the budget allocated to mitigate the Covid-19 impact is about 150 billion baht. Of the amount, 40 billion baht comes from budget adjustment, 90.9 billion baht derives from the central budget and the rest is from part of the 1-trillion-baht loan decree.
Further economic assessment will be evaluated in next year’s second quarter as to whether the planned budget is sufficient to mitigate Covid-19 impact, Mr Dechapiwat said.
In case the planned budget is insufficient, the government can issue a bill to transfer unnecessary spending, such as budgets allocated for seminars, into the central budget, he said.
An amount worth about 80 billion baht was transferred into the central budget for the fiscal 2020 budget.
If the government has to borrow more loans to manage the Covid-19 crisis and public debt reaches the 60% ceiling, this has to be undertaken to sustain economic conditions from deteriorating since the tourism sector has yet to recover to pre-Covid performance, said a Finance Ministry source, speaking on anonymity condition.
Investors are expected to understand and remain confident of the government’s fiscal stability, in case public debt exceeds the capped mandate, as such borrowing is aimed at restoring the battered economy, the source said.
Based on the Public Debt Management Office’s estimate, it’s expected that once the 1-trillion-baht loan decree is fully used in 2021, the ratio of public debt to GDP will reach 58-57%, up from the existing ratio of 47.04% in July.
‘‘ Operators still have faith in the government no matter what reports say about the financial status of the country. CHAIRAT TRIRATTANAJARASPORN President, TCT
OFFICIALS’ SALARY CUT
The Federation of Thai Industries (FTI) wants the government to fix its dated budget spending plan to alleviate fears that annual revenue may not cover the ongoing huge expenditure.
If necessary, the government may need to resort to a salary cut for thousands of state officials, a move that is “not unusual” during this economic recession, said Kriangkrai Tiannukul, the FTI’s vice-chairman.
“The current spending structure under the bureaucratic system does not fit the economic situation during the pandemic,” he said. “The structure is too big and not easily adapted to changing situations.”
A huge chunk of the government’s fixed cost is salaries and welfare benefits given to officials. In the FTI’s view, the money given to each ministry may be too much and leave an insufficient amount for public spending purposes.
Slashing part of a salary budget may be possible and should be taken into consideration, Mr Kriangkrai said.
“Once the global economy and the Thai economy recover, the government can grant normal pay,” he said. “Trying this approach would not be unusual.”
Many governments in the world have cut unnecessary expenses like the private sector, which adopted cost-saving measures even before the Covid-19 outbreak, Mr Kriangkrai said.
Many companies have already reduced salaries for their employees during the crisis. Some even made a 30-50% cut in order to survive.
The government following suit for the sake of “equality” between state officials and company staff to face a similar pay cut would be a good idea, Mr Kriangkrai said.
Apart from spending issues, the government should find better ways to increase revenue, he said. The target for tax collection continues to be missed despite efforts to collect more revenue in various ways.
Policies that are meant to reduce inequality must actually do the job, with the state welfare card scheme coming into the limelight.
Evidence shows that the scheme left out 64% of those who were truly poor. This means that out of 100 poor people, only 36 have the cards, so it doesn’t help reduce inequality as much, said Somchai Jitsuchon, research director for inclusive development at the Thailand Development Research Institute.
The government’s attempt to channel all poverty-targeting assistance through this scheme can be devastating to the excluded poor, Mr Somchai said.
“We could collect more tax, but experience shows that the rich have done everything to resist taxation and they often succeed,” he said. “What we can do right is to set aside more state budget for social and welfare spending and less for other purposes.
“The lack of social and political stability, the low quality of democracy, the flesh trade and human trafficking, crime, corruption … you name it. These social evils are different manifestations of structural problems that share the same root cause — inequality.”
KEEPING THE FAITH
Chairat Trirattanajarasporn, president of the Tourism Council of Thailand (TCT), said operators still have faith in the government no matter what reports say about the financial status of the country.
Even as the fiscal 2021 budget could be delayed for a bit, this is not expected to affect financial stability, Mr Chairat said.
The situation in 2021 may become even more dire as the government struggles to collect tax revenue, he said.
The vast majority in the private sector still need to lean on state budgets to stay alive, particularly through the debt repayment suspensions schedule to end in October.
This is the most urgent measure that can help support them while business operators are looking for soft loans, Mr Chairat said.
On top of urging the Bank of Thailand to extend the debt moratorium scheme, the TCT plans to submit a letter to the Labour Ministry to ask the Social Security Fund to reconsider helping employers compensate their workers’ monthly salary, as their businesses still cannot run as normal.
Nuntaporn Komonsittivate, head of commercial operations at Thai Lion Air, said the government is facing the toughest job of shoring up the country’s economy, which needs a tremendous budget to mitigate the impact.
Although the government is confident about financial stability, the most critical challenge is that this catastrophe has no known end, Ms Nuntaporn said.
To preserve stability, the government has to select the right working team that has profound knowledge and experience in economics and finance, particularly those who know what are the real problems and how to tackle them efficiently with the available budget, she said.
Kalin Sarasin, chairman of the Thai Chamber of Commerce, said the government remains far from broke, as treasury reserves are still considerably high.
However, he warned that the government’s spending decisions must be made carefully to prepare for the event of a possible second wave of coronavirus infections.
The government is also being urged to speed up financial aid measures to small and medium-sized enterprises, which are reeling from financial hardship.
“There is nothing to worry about with state borrowing, as long as it can help stimulate overall consumers’ spending and boost the economy,” Mr Kalin said. “What is more worrisome is mounting political rallies.”
‘‘
The current spending structure under the bureaucratic system does not fit the economic situation during the pandemic.
KRIANGKRAI TIANNUKUL Vice-chairman, FTI