Wallet fog fails to lift

The government’s announcement on the details of its digital wallet scheme on April 10 was meant to boost the popularity of both the Srettha Thavisin administration, as well as the Pheu Thai Party.

It failed the task. What it did was raise even more eyebrows, as it showed how the government is still scrambling to figure out a plan to fund the ambitious scheme.

As the government cannot borrow more money to fund the scheme, it has to rely on three sources of funds.

According to the announcement, it is planning to take 175 billion baht from the budget for the 2024 fiscal year, 152.7 billion baht from next year’s budget, and 172.3 billion baht in the form of an advance from the Bank of Agriculture and Agricultural Cooperatives (BAAC).

Several critics and economists have warned of the possible impact the scheme might have on the budget, as well as the BAAC’s liquidity.

Their concerns are worth noting, as it remains to be seen how the government can possibly squeeze out that much money from this year’s and next year’s budget to fund the digital wallet scheme. To do so, the government would have to divert money from other projects.

The biggest question, however, is the legality of taking a 172.3-billion-baht advance from the BAAC.

It needs to be remembered that the BAAC was established to help farmers and improve the country’s agriculture sector.

Past governments have used the bank to finance various schemes intended to improve farmers’ livelihoods, such as debt reduction schemes and various subsidies.

But let us not forget that the government still has to repay the BAAC the 273 billion baht which Yingluck Shinawatra used to fund her controversial rice-pledging scheme.

Furthermore, the digital wallet scheme isn’t directly related to farmers’ welfare or the agriculture sector. As such, the BAAC’s labour union is seeking the opinions of the State Enterprises Policy Office, the Bank of Thailand and the Council of State on the plan’s legality.

Another area of concern is whether the scheme, which is essentially a 500-billion-baht stimulus package, will succeed in boosting domestic spending and, thus, economic recovery as the government hopes.

Such stimulus could only work under two conditions. First, the cash must come from external sources.

By borrowing an excessive amount of cash from internal sources, the government is actually creating unnecessary pressure on domestic liquidity.

Second, the funding boost must be injected into a traditional, “closed” economy, where all aspects of the production chain, from the sourcing of raw materials to production and consumption, are concentrated within a country.

The Thai economy has evolved into an open, modern economy, so there is little guarantee that the massive cash injection will be spent and/or re-invested within the country.

Many people doubt the scheme will benefit smaller businesses as the government hopes, arguing that as most people buy from hypermarkets and wholesalers, it is likely that the scheme will benefit large corporations instead.

To allay these concerns, a special committee comprising independent experts must be formed to monitor the management and outcome of the package.

The appraisal must go beyond mere figures — what taxpayers want to see is a professional, neutral appraisal which clearly shows how the scheme benefits the population.