Pheu Thai’s 10,000 Baht Gambit: A Political Promise That Spells Possible Economic Peril

On 17 March, in an event that strongly hinted at his likely nomination as a prime ministerial candidate for the Pheu Thai party, Srettha Thavisin unveiled a key policy proposal: the 10,000 baht (US$270) digital wallet initiative. The proposed policy, which could cost 560 billion baht or more,  aims to distribute 10,000 baht of digital money to every Thai citizen aged 16 years old and above. The one-time disbursement is to be spent within a six-month period and within a four-kilometre radius of their registered residence. However, the same policy that initially catapulted Srettha — a renowned real estate tycoon but a political neophyte — into the spotlight is now casting a shadow on his political standing. It has also ignited widespread concerns about fiscal discipline and its potential impact on the economy.

A significant issue has been the lack of clarity and transparency regarding the funding and implementation of the policy. Upon taking office as prime minister, Srettha reaffirmed the promise to enact the policy. This pledge was reiterated in the policy statement released by the new administration on 11 September. In early October, a committee was established to oversee the policy’s implementation, with Srettha chairing the committee and pledging a rollout by February 2024. However, a clear consensus on the source of the approximately 560 billion baht needed for the initiative remains elusive. Deputy Finance Minister Julapun Amornvivat has stated that the committee is expected to reach a resolution by the end of October​.

With the fiscal 2024 budget bill still pending and limited budgetary flexibility, it is anticipated that the initiative will be financed, either partially or in its entirety, by borrowing from state-owned financial institutions, taking advantage of a technicality under Section 28 of the State Fiscal and Financial Discipline Act of 2018. This potential source of funding, which diverges from the initial details shared with the Election Commission, entails a modification in the ceiling on government borrowing from state-owned banks, such as the Government Savings Bank (GSB), to fund state projects. The move will increase the ceiling from the current 32 per cent of the government’s annual total expenditure to 45 per cent.

While this off-budget borrowing will not affect the public debt to GDP ratio, policy experts have voiced concerns about fiscal sustainability and other macroeconomic implications arising from the policy initiative. Ninety-nine economists and academics, including two former governors of the Bank of Thailand (BOT), have signed a petition to criticise the initiative. They single out the potential for long-term fiscal burden, especially amid interest rate hikes, and the opportunity cost involved. They also deem the policy to be unnecessary and misguided. The economic multiplier effect, which this policy aims to leverage to spur economic growth, could be less substantial compared to alternative stimulus measures, such as direct government spending. These warnings align with the stance of the current Governor of the BOT, Sethaput Suthiwartnarueput, who is advocating for a focus on investment rather than the stimulation of consumption. He suggests that financial assistance should be targeted at those most in need rather than distributed to all Thai citizens 16 years old and above.

… there is a stark possibility that both Srettha and Pheu Thai should consider: even if this policy is successfully implemented with minimal economic repercussions, Pheu Thai may still struggle to fully reestablish its political footing.

There are other concerns as well. Given its stated objective of stimulating the economy, it would be sensible for the policy to leverage on existing infrastructure and user base, such as the Paotang mobile app by Krungthai Bank (KTB), which has been in use since the Covid-19 pandemic. Instead, the policy’s architects insist on using a blockchain-enabled digital wallet and utility tokens, which, under the current regulations by the BOT, are not recognised as a means of payment. Criticism has also been directed at the stringent conditions stipulating that the digital money must be spent at local businesses within a 4 km radius. The criticism has prompted discussions about potentially amending the restriction to extend the spending boundary​.

Despite the alarms sounded by experts and unsettling signals from the stock and bond markets —reflecting the pricing-in of the expected impact of the policy and an overall decline in international investor confidence in Thailand’s economic performance — Pheu Thai has remained resolute. This stance tells a deeper story: it is crucial to remember that Pheu Thai, despite losing the election, managed to rise to power by forming a controversial alliance with the military and conservative establishment. The alliance has raised serious questions about the government’s legitimacy, as it sidestepped the election winner and made compromises that essentially amounted to breaking an earlier campaign pledge to maintain a pro-democracy alliance.

In this difficult political landscape, the Pheu Thai government is in a precarious position and feels the need to fulfil its policy commitments in order to regain credibility in the eyes of its supporters — at least those who voted for the party with the expectation of receiving the 10,000 baht giveaway. From this standpoint, it becomes apparent that the proposed digital wallet policy was never solely intended to stimulate the economy; instead, it serves as a political tool designed to revive Pheu Thai’s image and secure political standing for a prime minister lacking in popular mandate, no matter the cost. Seeking political gain from policy initiatives is not wrong — it is a fundamental aspect of programmatic political competition in well-established democracies. However, there is a stark possibility that both Srettha and Pheu Thai should consider: even if this policy is successfully implemented with minimal economic repercussions, Pheu Thai may still struggle to fully reestablish its political footing. The election results indicated that a majority of Thai voters cast their ballots with a focus on ideology and structural reform, rather than being swayed by Thaksin-style economic populism. In essence, the multiplier effect that Pheu Thai is banking on, both economically and politically, may be a self-delusion — one that comes at a hefty financial cost.

2023/245