Thailand’s Fiscal Policy:

Developments and Outlook

Fiscal Policy Office
Ministry of Finance
28 August 2002
 Overview
• Expansionary fiscal policy as a cushion for global
slowdown in 2001-2002
• FY 2002 Fiscal outturn (October 2001-July 2002)
• Planned fiscal adjustment in FY2003
• Looking beyond next year: Medium-term fiscal position
Expansionary fiscal policy acts as a cushion for
global slowdown in 2001-2002
• Fiscal stimulus as a reaction to slower growth in exports.
• Planned deficit for FY2002 is record high at 200 billion
baht.
• Greater flexibility in responding to the economic situatio
n: 58 billion baht Emergency Reserve Fund.
Government initiatives have played a significant
role in driving the economy

• On budget initiatives include the Village Fund and

Farmers’ Debt Suspension.
• Off budget initiatives include the People’s Bank and the
Government Housing Bank’s Mortgages for public
servants
 Government Initiatives: The Village Funds
Government Villagers
Debt service
from budget 70.08 billion
for 8 years baht

Government 80 billion National Village 73.4 billion Village Funds

Savings Bank baht Fund Office baht

• The village fund is a type of revolving fund.

• The debt is included in the government guaranteed debt figure. Principal repayment
from the budget is 10 billion baht for 8 years. Interest rate is equal to 12 month fixed
deposit rate + 1.75%.
• Several surveys suggest that villagers use the fund to enhance production capacity, espe
cially in the agricultural sector.
Figures are as of July 31, 2002
 Government Initiatives (continued)
• Farmers’ Debt Suspension: Highly indebted farmers who are debtors
of BAAC are eligible for this program. Farmers do not have to pay the
ir debt for 3 years. Government pays interest to BAAC from its budget
(8 billion baht this year and 6 billion baht in the next two year). 2.27 m
illion farmers participate.
• People’s Bank: A Micro-credit scheme operated by GSB without any
burden in the budget. At the end of July, outstanding loan amount is 5.
79 billion baht. NPLs represent 4.1% of outstanding loan.
• Expansionary fiscal policy as a cushion for global
slowdown last year
• FY 2002 Fiscal outturn (October 2001-July 2002)
• Planned fiscal adjustment in FY2003
• Looking beyond next year: Medium-term fiscal position
 10 month revenue collection is higher than targeted
unit: billion baht
• Total revenue collec Cumulative Compared to Projected Compared to
Revenue Target FY 2002 Target
tion (Oct. 2001 - Jul
10 months % Revenue %
y 2002) is 8.3% hig
her than targeted. Revenue Dept. 430.66 5.5 537.15 4.3
Excise Dept. 172.18 12.7 203.74 11.9
• Total FY2002 net re
Customs Dept. 808.54 -7.5 96.46 -8.8
venue is projected t
Other Gov. Agencies 97.51 33.3 102.70 1.9
o be 30 billion baht
Total Revenue Collection 781.22 8.3 940.05 4.0
higher than targeted
Net Revenue 701.13 7.2 850.89 3.4
.
Compiled by: Fiscal Policy and Planning Division, FPO.
 Budget disbursement excluding 58 billion baht
reserve fund is at record high.
unit: billion baht
• The disbursement for
10 months Compared to Projection
the FY 2002 budget,
excluding 58 billion b Disbursement 10 month for
aht reserve fund, is ex target (%) FY 2002
pected to be record hi Budget Disbursement 827.48 0.20 1,000.80
gh at 93.4%. From Current FY 748.86 (0.16) 918.80
• The remaining of 58 -- Capital Expenditures 148.82 - -
billion baht reserve fu
nd will be carried ove -- Current Expenditures 600.04 - -
r to next fiscal year. Carry-over 78.62 3.73 82.00
Government deficit is expected to be lower than target
billion baht
10 months Projection
Cumulative for
(Oct. 01-July 02) FY 2002
Revenues 694.7 838
Expenditures 827.5 1,000.8
Budgetary Balance -132.8 -163.1
Non Budgetary Balance 11.8 -14.9
Fiscal Balance -120.9 -178.0

• Public sector deficit (CG + Local Authorities + Non-financial Pub

lic Enterprises) is expected to be 149.7 billion baht or 2.9% of GD
P
• Expansionary fiscal policy as a cushion for global
slowdown last year
• FY 2002 Fiscal outturn (October 2001-July 2002)
• Planned fiscal adjustment starting FY2003
• Looking beyond next year: Medium-term fiscal position
 The government will assume a smaller role in
stimulating the economy in FY2003

• The budget is prepared under the assumption that private sector will assume
the main engine of growth while monetary policy becomes more effective.
• The planned budget deficit in FY2003 is 174.9 billion baht or 3.1% of GDP,
compared to 200 billion baht in FY2002 (3.6% of GDP).
• Zero-based and performance based budgeting is introduced.
• The budget includes 16.6 billion baht structural adjustment expenditure.
FY2003 budget is based on 4 main national strategies

Billion Baht
Strategy Budget
Amount %
Total 999.9 100.0
1. Economic Rehabilitaion and Development 153.3 15.3
2. Structural Adjustment for Sustainable Competitiveness 55.9 5.6
3. Social Development, Poverty Alleviation and Quality of Life Enhancement 443.7 44.4
4. National Security and Foreign Affairs 87.0 8.7
5. Public Management 260.0 26.0
• Expansionary fiscal policy as a cushion for global
slowdown last year
• FY 2002 Fiscal outturn (October 2001-July 2002)
• Planned fiscal adjustment in FY2003
• Looking beyond next year: Medium-term fiscal position
 Working towards fiscal sustainability...
• Current figure for Public debt/GDP is 54.8% (May 2002)
– Direct government debt 25%
– SOE debt 18%
– FIDF liabilities 12%
• The government publicly announced its fiscal position target :
– Public debt/GDP will not be higher than 65%
– Debt service in the budget will not be higher than 16%
– The government aims to achieve balanced budget by FY2007
• Clear MOF-BOT resolution to fiscalize of FIDF losses is accomplished
with minimal impact on the fiscal position and taxpayers.
 The fiscalization of FIDF losses

1.4 trillion baht losses

FIDF 1 FIDF 2 FIDF 1

500 billion 112 billion 780 billion

The BOT is responsible for principal repayment while the MOF is responsible
for interest payment.
Public Debt/GDP gradually decreases in the medium term.
%
65

60
58.04 59.18 58.97
57.83 57.22 57.50
55
53.45
50 49.58
45.43
45

40
2000 2001 2002 2003 2004 2005 2006 2007 2008
Debt Services/Budget is capped to give enough room for ca
pital expenditure.
%
17
15 15.22 15.62 15.56
15.38
15.89
14.00
13
11 11.29
9 9.47
9.04
7
5
2000 2001 2002 2003 2004 2005 2006 2007 2008
 Fiscal balance can be achieved by FY2007.
%

1
0.45
0 -0.06
-0.69
-1 -1.20
-1.41
-2 -2.00
-2.50 -2.65
-3
-3.81
-4
-5
2000 2001 2002 2003 2004 2005 2006 2007 2008
 Ongoing effort in fiscal reform

• Privatization program
• Fiscal decentralization
• Tax reform (including expansion of tax base and import duty
restructuring)
• Ongoing effort to improve fiscal institutions include the draft Budgetary
Procedure Law and the draft Public Debt Management Law.