Government efforts to cut public debt are not based on good economics but political motivation, former finance minister Thirachai Phuvanatnaranubala says.
The former minister, who lost his job in last week's cabinet reshuffle, said the government was attempting to conceal the real extent of public borrowing.
He was commenting on his Facebook page on the government's plan to sell its shares in state enterprises PTT Plc and Thai Airways International.
The sell-off will result in a reduction in official records of public debt.
The government hopes that once official records show the state is carrying less debt, it will then be able to borrow 400 billion baht to finance a flood rehabilitation and prevention scheme as well as infrastructure development.
Mr Thirachai said the government needs to borrow substantial sums to set up a comprehensive system for water drainage and logistics. Additional debts were acceptable if the money was well spent, free of corruption and resulted in sustainable income growth.
"I do not disagree with attempts to reduce the government's shareholding in state enterprises, as long as it improves efficiency and is not a transfer of monopoly power from the state to any private group," Mr Thirachai said.
Thailand's public debt stands at 42% of GDP, which is still regarded as low.
The prudent limit is 60% which means Thailand can borrow 2 trillion baht more without affecting market confidence.
"In short, we don't need to fudge our public debt figure to borrow more. Why then are there attempts to understate public debt?" he asked.
He added the answer is that lower public debt would remove any pressure on the government to raise taxes in future.
If public debt was correctly stated, to include the debt carried by the two state enterprises in which the government is now proposing to sell down its stake, the government would come under pressure to raise VAT and excise tax on petrol.
If that happens, "the ruling party will lose votes", he said. "The lower level of debt will allow for more populist policies, lead the people to more consumption, and a disregard for sufficiency."
Mr Thirachai said the 2005 Public Debt Act was created to prevent politicians and "fake intellectuals" from misstating public debt.
The law stipulated the debt of a state enterprise in which government entities hold more than 50% of the shares would be recorded as public debt.
"Some people spotted the loophole and proposed that the ministry transfer a few shares in THAI and PTT to the Vayupak Fund until the direct holding falls below 50%," he said.
In this manner, the finance minister will be able to dispose of public debt without having to actually repay it, because the Vayupak Fund is actually under the control of the Finance Ministry.
Virabongsa Ramangkura, chairman of the government's Strategic Committee for Reconstruction and Future Development, is thought to have initiated the share transfer idea. The government says it is considering it."Fiscal discipline should be determined by economic principles, not political convenience," Mr Thirachai said.
Reply With Quote
Originally Posted by Japamerican
Bookmarks