By Tim Johnston in Bangkok
Published: June 17 2009 07:50 | Last updated: June 17 2009 07:50
After weeks of bruising political infighting, Thailand’s lower house passed two bills late on Tuesday authorising the government to borrow Bt800b ($23.5bn) to fund its ambitious three-year stimulus programme.
The money, to be raised in Thailand’s highly liquid domestic markets, will go toward the coalition government’s “Invest for Strength” stimulus programme. It is worth Bt1,430b over three years, equivalent to some 5 per cent of gross domestic product each year, the bulk of which is to be spent on infrastructure improvements and public development.
The opposition mounted a failed legal challenge to the constitutionality of the government’s decision to expedite Bt400b of the loan through executive decree, and a drawn out debate in parliament failed to block the rest of the legislation.
Although analysts estimate that there is some Bt1,000b in excess liquidity in Thailand’s domestic markets, there have been concerns that such borrowing might hurt the financing needs of local companies. However, Korn Chatikavanij, the finance minister, said the net effect was likely to be small.
“The amount of money coming into the system will be almost Bt1,500b, and since the bulk of that spending will be domestic – there won’t be a large import content – that means that the money will stay in the system,” Mr Korn told the FT.
Thailand is dependent on exports for 60 per cent of its GDP, and Mr Korn estimated that the economy would contract by between 4 and 5 per cent this year.
The lower house passed the bills after acrimonious debates ran into the small hours on Monday and Tuesday, with the opposition walking out of the house early on Wednesday morning.
Mr Korn said the fact that opposing political interests could sort out their differences within the limits of the country’s constitutional democracy, rather than through the violent street demonstrations that have been a feature of recent months, would go some way to restoring battered domestic and international confidence in Thailand.
“It reconfirmed the fact that there is an institutional process in Thailand which people can have faith in,” Mr Korn told the Financial Times on Tuesday.
Despite broad agreement that the country needs a stimulus programme, local commentators have accused the government of putting political concerns ahead of economic policy.
“The Bt800bn package is like a giant lollipop to pacify petulant coalition partners,” Avudh Panananda wrote in an opinion piece in Tuesday’s edition of The Nation newspaper.
Prime Minister Abhisit Vejjajiva came to power last December in a controversial parliamentary vote in which his Democrat Party persuaded a key faction of what was then the ruling coalition to change sides, but the faction – now consolidated as the Bhum Jai Thai Party – demanded key ministries, including interior, transport and commerce, as a dowry.
Mr Korn estimated that these ministries would control around Bt600bn of the new funds.