The unwieldy and blunt Digital Wallet online credit giveaway, using blockchain technology, will be conducted through the Krungthai Bank smartphone banking application, and it must be spent within six months
A savvy political street protest organiser and TV political pundit is predicting the controversial ฿10k Digital Wallet giveaway could lead to fissures and tensions within the new cabinet, just sworn in on September 5th. He predicts this before it is finalised and gets the green light for its debut on February 1st 2024. There are increasing concerns about the country’s deteriorating economy, while analysts and the Governor of the Bank of Thailand, Sethaput Suthiwartnarueput, are openly questioning the costly stimulus measure. Already, the government has agreed to exclude wealthy Thais from the provision and is contemplating further changes at a critical meeting on October 19th.
Amid tensions between Thai Prime Minister Srettha Thavisin and the Bank of Thailand Governor, Mr Sethaput, over the Thai government’s economic policy of financial stimulus, the government’s controversial Digital Wallet giveaway stands to the fore.
On Wednesday, a key political figure and pundit, Mr Jatuporn Prompan, suggested that the government’s signature proposal to give every citizen over 16 years of age ฿10,000 in digital credits will ultimately not proceed next year.
He warned it runs a high risk of collapsing the government.
Deputy Minister of Finance suggests that the proposed giveaway could be amended by excluding wealthy people in Thailand during the registration
On Tuesday, the government suggested it was amenable to amending the giveaway for the first time when a minister accepted that wealthy Thais may be excluded from the benefit.
This would occur when people are asked to register for the digital payout in the coming week.
The pressure on the initiative is coming amid a deteriorating economic performance, with growth in the first six months of 2023 only coming in at 1.8% and less than optimistic projections for the final quarter of 2023, which has already begun even with the predicted boost for the foreign tourism high season.
The Bank of Thailand has already scaled back projected GDP growth to 2.8% compared to other analysts’ predictions of 2.7% for 2023, just ahead of last year’s disappointing 2.6% growth figure.
This means growth levels of 2.6% and 2.8%, respectively, in two years, with an inflation rate of 6.08% for last year and a projected 2.6% for 2023.
Bank of Thailand boss has described the stimulus measure as not targeted enough, too blunt and short term to address economic goals and inequality
This sharpening of the efficacy of the Digital Wallet measure by restricting access would be in line with comments made by the Bank of Thailand Governor, Mr Sethaput, in recent times, who indicated that the giveaway initiative was a blunt instrument, which would do little ultimately to address inequality in the Kingdom.
The central bank chief also said it was a short-term measure offering only a limited boost, which may help trigger inflationary pressures.
The digital giveaway will reportedly use blockchain technology using a smartphone app operated by the Krungthai Bank and offer digital credits.
However, it has been made clear that these credits will not be convertible to baht or represent a digital currency. They have to be disposed of within 180 days.
Debate comes amid Thais rescued from Israel
The debate over the ฿10,000 giveaway is coming with Prime Minister Srettha Thavisin away on a tour of Asian and ASEAN countries as the government scrambles to organise a rescue of Thai citizens from Israel after Saturday’s massacre of civilians in the south of that country, which has seen 5,174 Thai citizens register to be repatriated with 20 dead and 14 Thais held as hostages.
The first 41 Thais returned home on Thursday aboard El Al Flight LY083 from Tel Aviv.
On Tuesday, Deputy Finance Minister Julapun Amornvivat suggested that a committee reviewing the scheme will meet on October 19th and may decide to restrict the eligibility for the benefit.
Questions about financing the ฿560 billion initiative with higher public debt projected and a ฿272 billion bond issue before December with rising yields
Questions are also being raised about how the ฿560 billion price tag for the stimulus measure will be met, with the government projecting a higher public debt figure in the coming year.
Some reports suggest that a government bond sale is due between now and December aimed at raising ฿272 billion, which will be part of the solution.
The fundraising exercise is coming amid higher bond yields on Thai 10-year bonds since September, driven by similar rises in the United States.
On Wednesday, Mr Jatuporn Prompan, a former Chairman of the United Front for Democracy against Dictatorship (UDD) and leader of street protests in Thailand, as well as a former acolyte of Pheu Thai and former Premier Thaksin Shinawatra, suggested that the digital wallet giveaway could lead to the breakup of the coalition government, which was formed at the end of August and sworn in on September 5th.
Former UDD or Redshirt leader turned political pundit quoted former Prime Minister Thaksin Shinawatra as he strongly criticised the stimulus measure
Jatuporn has made a name for himself in 2023 as a top TV political pundit.
He quoted Thaksin, the former prime minister, describing free money handouts as a retarded method of inducing economic growth.
The redshirt icon, who has spent time in prison for his political activism, appeared to compare the signature government policy to the rice-pledging scheme introduced by the government of Yingluck Shinawatra before the 2014 coup, which led to criminal prosecution and jail terms for ministers and officials involved when it ended.
The scheme lost the state up to ฿500 billion, depending on the analysts, after leaving a ฿100 billion debt with one bank alone, the Bank for Agriculture and Agricultural Cooperatives (BAAC), when the scheme to support rice prices for farmers, operated from 2011 to 2014.
Mr Jatuporn Prompan, on Wednesday, suggested many cabinet members will be nervous that they could become the subject of an investigation by the National Anti-Corruption Commission for being involved with the execution of the Digital Wallet initiative, including approving the measure at the cabinet table.
Pressure building within the unlikely cabinet formed at the beginning of September as the controversy over the handout scheme builds
Mr Jatuporn, during the summer, correctly predicted that the Pheu Thai Party would break ranks with the Move Forward Party to form a government with parties associated with the outgoing administration.
He predicts that at some point between now and the 1st of February 2024, which is when the Digital Wallet initiative is to go live, there will be a crisis within the cabinet.
It should also be noted that the public remains to be convinced about the complicated populist handout associated with Prime Minister Srettha Thavisin.
It coincided with a drop in public support for the Pheu Thai Party before the May 14th General Election, with voters decisively opting for the Move Forward Party approach involving raised social welfare and structural reforms to create a social welfare state after it was unfurled as signature policy.
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The policy was abandoned by Pheu Thai just after it was investigated by the Election Commission to see if it was adequately costed and in line with a coherent budgetary plan.
Ministers in the cabinet associated with the outgoing government will be calibrating their positions very carefully as the measure poses a long-term threat
The political activist, a former MP, said there was a chance the initiative could be reported in due course to the National Anti-Corruption Commission (NACC) or lead to a criminal investigation, such as what happened with the rice-pledging scheme if aspects of the massive public giveaway go awry or end up being mismanaged.
Mr Jatuporn, on Wednesday, suggested that many of the ministers associated with former government parties would be calibrating their position very carefully, particularly regarding the opposition to the initiative from the current governor of the Bank of Thailand.
He raised several questions about the efficacy of the plan, particularly the limit on the period the digital credits must be spent, currently set at six months, and who ultimately would benefit from this increased expenditure.
Many questions about the scheme remain
Mr Jatuporn said that Prime Minister Srettha Thavisin had not given clear answers to many questions raised relating to the execution of the massive giveaway, including the limitation placed on the use of the digital wallet credits within 4km of where the beneficiary is living as well as the exact nature of the digital credits and their value.
‘About the distribution of digital money, those who know can see where the money will end up; how will the country’s finances be? They will all be destroyed. We have to be cautious about fulfilling people’s desires. Everyone knows that this is poisoned honey. Even if you have to pay off the debt in how many years, it is something that Thai people must take responsibility for. If this money distribution can be done, why can’t we do it again next time? And perhaps increase the amount of money distributed to ฿20,000 or ฿30,000. So, I still believe today that in the end, it will not be done. Moreover, Thaksin Shinawatra described any policy of just giving out money as a retarded method.’
On Tuesday, however, the Deputy Minister of Finance, Mr Julapun, insisted that the scheme would go ahead and would help generate 5% growth in the economy next year.
Minister argues that the Digital Giveaway will help spur growth in 2024 with the Pheu Thai economic plan targeting 5% GDP growth
Mr Julapun said that the country was facing chronic problems that were impacting the living conditions of ordinary people with an inability to widen the Kingdom’s tax base.
The Deputy Finance Minister pointed to household debt reaching 90% of GDP.
In comparison, the level of public debt has risen from 40% ten years ago to 60% last year and just above 60% presently.
In the next fiscal year, the government projects a high public debt of 65% of GDP, with the State Fiscal and Financial Disciplines Act 2018 already amended by the previous government to allow for an upper limit of 70% of GDP.
Despite this, the government is targeting 5% growth in 2024, with the Bank of Thailand currently predicting 4.4%, following a final figure of 2.8% for 2023.
Rising prospect of GDP contraction for 2021 may see government breach the legal public debt limit
Expanded public debt and budget deficit
Mr Julapun repeated Pheu Thai policy: the digital credit giveaway would act as a multiplier effect within the economy and lead to increased taxation income.
Handout projected to see ฿120 billion recouped in taxes with the first year by the Revenue Department
Figures put forward this year by the Pheu Thai Party suggested that the ฿560 billion would generate ฿120 billion in additional taxes in the current financial year.
However, the scheme is meeting with rising criticism, indirectly from the Governor of the Bank of Thailand, Mr Sethaput, and a growing number of economic analysts and experts.
Mr Julapun, on Tuesday, acknowledged this but insisted that the core policy of the government must be prosecuted and pointed out that it would benefit those on low income and the most vulnerable.
Changes due at the October 19th meeting
Over the weekend, Prime Minister Srettha Thavisin told reporters that in discussions on this matter, the opinions of the less well-off and rural farmers, besides the academic experts in Bangkok, should also be considered.
On Tuesday, the Deputy Finance Minister announced that the government would be moving towards registering people for the new scheme even as he accepted that perhaps the more well-off will not be eligible once the Standing Committee reviews the matter on October 19th.
He also said the committee would consider widening the four-kilometre radius for those wishing to spend the digital credits in their local districts or provinces.
The junior minister insisted that the government already has the required funding for the project, even if this meant reducing the budget for other government initiatives in the next fiscal year.
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Further reading:
Tension grows between the Bank of Thailand and government after last week’s interest rate hike
Bank of Thailand boss appears critical of the new government’s policy initiatives on the economy
Concerns over household debt rising as banks report marginally lower non-performing loans
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Economic danger signals emerging as politicians wrangle over who will form the next government
Bank of Thailand to tackle household debt in new plan from 2024 which will see higher standards
Politicians skating on thin ice as the economy may not be able to withstand a political stalemate
Debt crisis may be one of the top items on the new cabinet’s agenda as central bank stands ready
Potential hazard lights flashing as kingdom’s auto loans spiral into default with sky-high borrowing
Bank of Thailand governor gives veiled warning to voters on the danger posed by populist policies
Financial markets debt sell-off sending a signal to Thailand before the May 14th General Election
PM warns giveaway policies of some parties may be ‘bad karma’ for the country in the longer run
Economic recovery shaky despite strong foreign tourism as global economic outlook deteriorates
