A total of seven emergency loan decrees were issued from 1998 to 2021, authorising combined borrowings of 3.83 trillion baht to address various economic crises, including the Asian financial crisis and the Covid-19 pandemic.
Finance Minister Pichai Chunhavajira has not ruled out issuing a new emergency decree to authorise borrowing in response to economic challenges, which are expected to be exacerbated by a global slowdown linked to US President Donald Trump’s tariff hikes.
Recently Mr Pichai said if there is a need for an economic stimulus programme, it must be large enough to create significant momentum. If such a stimulus was deemed necessary, he said it would require funding of at least 500 billion baht and should focus on domestic issues, including raising consumption and investment, as well as providing soft loans.
To fund such a decree, multiple options are being considered and discussions are continuing with relevant agencies, including the National Economic and Social Development Council (NESDC) and the Bank of Thailand, said Mr Pichai.
What are the legal provisions for government borrowing?
Under the Public Debt Management Act of 2005, the Finance Ministry is allowed to borrow for the following purposes: to compensate for budget deficits when government expenditure exceeds revenue; for economic and social development; to restructure public debt; to re-lend to other agencies; and to develop the domestic bond market.
For budget deficit compensation, which has been a consistent government practice over the past 20 years, the borrowing limit is capped at 20% of the total annual expenditure budget and any additional spending for that fiscal year, plus no more than 80% of the allocated budget earmarked for debt principal repayment.
For supporting economic and social development, this is allowed when spending is needed in excess of the annual expenditure budget, and the funds must be in foreign currency. In such cases, the Finance Ministry is allowed to borrow in foreign currency up to 10% of the annual expenditure budget.
Beyond the guidelines of the Public Debt Management Act, government borrowing must also comply with the principles outlined in the 2018 State Financial and Fiscal Discipline Act.
Section 53 of that Act mandates government borrowing beyond what is authorised in the Public Debt Management Act must be via a special law, and only in cases of urgent and necessary action to address national crises where it is impossible to allocate the annual expenditure budget in time.
Such special laws must specify the purpose of the borrowing, the borrowing period, the programmes or projects for which the borrowed funds will be used, the authorised borrowing amount, and the government agencies responsible for implementing those programmes or projects.
Moreover, any emergency decree for borrowing beyond the scope of the Public Debt Management Act must align with Section 172 of the Thai constitution, which states in cases where it is necessary for the sake of national security, public safety, economic stability, or the prevention of public disasters, His Majesty the King may enact an emergency decree with the same force as the Act.
The emergency decree can only be carried out when the cabinet deems it an emergency situation requiring urgent and unavoidable action.
What were the reasons for past emergency borrowing decrees?
Each emergency decree had its own rationale. In 1998, under Prime Minister Chuan Leekpai, a decree allowed the Finance Ministry to borrow up to 300 billion baht to stabilise financial institutions affected by high levels of non-performing loans, enabling them to resume normal lending operations.
Also in 1998, another decree allowed borrowing of up to 500 billion baht to support the Financial Institutions Development Fund to address the financial crisis that affected public confidence in the financial system.
Under Prime Minister Yingluck Shinawatra, following massive flooding in 2011, a 2012 decree authorised borrowing of up to 350 billion baht to fund water management systems and future national development. However, an unstable political climate prevented the government from accessing the loan.
The largest borrowing under an emergency decree occurred during the Prayut Chan-o-cha administration, in response to the economic impact of the pandemic, which led to a nationwide shutdown and hobbled the incomes of many people. The decree authorised the Finance Ministry to borrow funds to address the crisis and support the recovery of the economy and society during the Covid-19 outbreak.
This decree was issued in 2020 with a borrowing limit of 1 trillion baht. However, this amount proved insufficient, and in 2021 the government chose to borrow an additional 500 billion baht, bringing the total to 1.5 trillion baht.
The large scale of borrowing, combined with the government’s routine borrowing to offset budget deficits, led to the government announcing an increase in the public debt ceiling to 70% of GDP from the previous limit of 60%. As a result, the level of public debt rose significantly from the pre-pandemic period.
In September 2019, public debt was 41.1% of GDP, increasing to 49.4% the following year, and as of February 2025 the proportion was 64.2%.
Will issuing an emergency borrowing decree affect the government’s fiscal stability?
An additional emergency decree for borrowing would definitely increase the public debt level.
The government considers a public debt ceiling of 70% of GDP sufficient to maintain the credibility of its fiscal position. This credibility is crucial as it significantly influences the government’s borrowing costs in financial markets.
However, Mr Pichai said policy should not only focus on rising public debt levels, but also how borrowing can help expand the size of the Thai economy. If the economy can grow, the public debt-to-GDP ratio will eventually decline, he said.
The framework for assessing government fiscal stability, as defined by the Finance Ministry, consists of five key indicators:
1. Public debt must not exceed 70% of GDP (as of September 2024, it was 63.3%).
2. The burden of public debt relative to government revenue in a given fiscal year must not exceed 35% (as of September 2024, it was 35.1%).
3. Public debt denominated in foreign currency must not exceed 10% of total public debt (as of September 2024, it was 1.05%).
4. Public debt in foreign currency relative to the country’s export earnings from goods and services must not exceed 5% (as of September 2024, it was 0.05%).
5. The budget allocation for principal debt repayment must be between 2.5% and 4% of the annual expenditure budget (as of September 2024, it was 3.28%).
If the government issues another borrowing decree, how would it affect public debt?
Over the past several years, the Thai economy has remained in a prolonged period of low growth.
Since 2018, when it expanded by 4.2%, a level near its economic potential according to the NESDC, Thai GDP growth has never exceeded 3%.
In 2019, growth was 2.3%. In 2020, when the Thai economy was slammed by the impact of Covid-19, it contracted by 6.2%. Growth in 2021 tallied 1.5%, then 2.5% in 2022, 2% in 2023, and 2.5% last year.
The NESDC forecasts growth of 2.8% this year.
Prolonged economic growth at a low level affects the government’s revenue collection, part of which is used to service public debt.
According to the government’s medium-term fiscal plan (for fiscal years 2026-2029), the Public Debt Management Office (PDMO) faces challenges in managing the government’s debt servicing budget, particularly with regard to interest payments. This is partly due to the high volatility of global interest rates.
As a result, over the past three fiscal years (2022-2024), PDMO has allocated additional funds for interest payments beyond what was initially budgeted from the treasury, totalling 50.4 billion baht.
Although this amount remains manageable, securing sufficient budget allocations or establishing additional measures for interest payments to accommodate fluctuations in global interest rates would enhance long-term fiscal stability, according to the plan.
The PDMO set an internal benchmark, with the ratio of government interest payments to estimated government revenue to not exceed 10%, which may be based on the criteria used by credit rating agencies.
At the end of fiscal 2022, this ratio was 8.29%, and it is currently at 9.59%, though PDMO raised the ceiling for this ratio to 12%.
