Bill reins in populist ‘mai pen rai’ urges
While mai pen rai, a frequently used Thai expression for “never mind”, “it’s okay” or “don’t worry”, may represent the compromising nature of Thais, it also carries a negative connotation of our tendency to skip dealing with a problem or avoid fixing problems where it hurts.
Such a notion does not bode well if it is applied to public issues like undisciplined and lavish spending of taxpayers’ money on quasi-fiscal activities to serve the interests of politicians and their governments.
Out of concern over such spending by governments which used off-balancesheet loans to finance populist policies made during election campaigns, a new monetary and fiscal law has been initiated to “fix problems where they hurt” and will soon become law.
It features fiscal discipline to ensure a more sustainable and transparent fiscal administration.
Such fiscal discipline is required because the implementation of populist policies by many governments in the past decade had caused anxieties about the stability of the country’s fiscal status.
The most criticised quasi-fiscal activity was the Yingluck Shinawatra government’s rice-pledging scheme, financed through the Bank for Agriculture and Agricultural Cooperatives (BAAC), which collectively incurred a debt of over 500 billion baht.
If the repayment amount to the BAAC remains at the current level, it is estimated it will take about 16 years for the state to pay off this debt.
Many governments including the current military one have appeared to apply the same mai pen rai attitude when it comes to the use of off-balance-sheet loans to finance their populist policies, out of a belief the state’s fiscal position will not be affected and will remain healthy.
In the lead-up to the 2014 elections many parties vied for votes with populist policies. The most controversial policies were the rice subsidy of the Yingluck government, in which the pledged rice price from farmers was set at a rate above the market price of 15,000 baht a tonne, while the first-car scheme which paid a total of 81.1 billion baht in excise tax returned to about 1.1 million first-time car buyers as a rebate.
Other parties also offered their version of populist policies to voters. These included soft home loans with a 10-year fixed interest rate of 1% and free electricity use for consumers using no more than 90 units a month.
The implementation of these policies worried officials at the Ministry of
Finance’s Fiscal Policy Office who started to realise such quasi-fiscal activities posed potential risks to the nation’s fiscal position.
As a result, they pushed for a new law to impose restrictions on off-budget spending.
However, their proposal did not materialise until the post-2014 coup period when the government of Gen Prayut Chan-o-cha took the plan and came up with the monetary and fiscal bill which now has been approved by the cabinet.
But the bill still needs to walk a fine line. If fiscal discipline is too tight, the country’s economic development may be held back by a lack of flexibility.
By contrast, if it is too loose, there could be loopholes for governments to exploit.
But the ultimate aim of the bill is to impose control at a certain level over budget spending by governments to ensure it serves the interests of the country and its people.
When it vetted the bill, the Council of
State argued the proposed fiscal rules in the bill were too rigid and did now allow flexibility for governments to implement their policies. Therefore, the state’s legal arm revised some parts of it.
For example, the Council of State removed the 5% ceiling for off-budget spending and the requirement that governments must set aside a budget to pay off debt obligations incurred from quasi-fiscal activities undertaken through state-controlled banks within two years.
Instead, it suggested broader measures that restrict quasi-fiscal spending for the
purposes of the country’s rehabilitation from disasters and terrorism, economic stimulus and enhancement of national capabilities.
Even though Thailand has not been hit by fiscal crises in recent decades, that does not mean governments can be reckless. Instead, they have to be cautious when seeking loans to fund their schemes.
Off-budget spending needs to be contained to avoid any risks to the country’s fiscal stability — the main pillar that keeps our economy running at a time of
any financial crisis.
Since approved by the Council of State, the monetary and fiscal bill will soon become law. It will hit the problem where it hurts as it will impose fiscal discipline on governments, closing loopholes used by past governments for quasi-fiscal activities via state-run banks to fund their projects.
Notwithstanding its less rigid approach, the new law will have teeth, demonstrating Thailand’s awareness of its fiscal risks. This should send a signal to future governments to be more prudent with spending taxpayers’ money.
In the past, several governments may have opted for the mai pen rai attitude when it comes to lavish spending to serve their populist schemes, and many of them were plagued with corruption scandals and questions over their worthiness. We should not wait until we experience a fiscal crisis to stop saying mai pen rai about our budget expenditure.
Off-budget spending needs to be contained to avoid any risks to the country’s fiscal stability.