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7 May 2009

Thailand to borrow $22.7bn for stimulus

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Thailand's cabinet has approved plans to borrow 800 billion baht ($22.7 billion) to finance stimulus spending and fiscal deficits between now and 2011, Reuters quoted Finance Minister Korn Chatikavanij as saying Wednesday.

The planned borrowing from local and foreign sources would be needed despite a government decision to trim its 3-year stimulus plans to 1.43 trillion baht from 1.56 trillion.

This would be used for building transport and agricultural sector infrastructure to help boost a recession-hit economy, the minister told reporters.

"This stimulus programme will strengthen the Thai economy. It will create 2 million more jobs for our people when its results are evident from 2011," Korn said on local Channel 3 television.

Finance ministry officials said about 40 percent of the 1.43 trillion baht stimulus programme, running from October 1 this year to late 2012, would be financed through annual fiscal budgets.

In addition, about 17 percent would come from local borrowing, 27 percent from foreign loans and 16 percent from joint venture funds contributed by the private sector.

The government expects surging budget deficits in the current and 2009/2010 (Oct-Sept) fiscal years due to its big stimulus spending and large tax revenue shortfalls as the economy contracts.

Finance ministry officials have forecast the budget deficits for both 2008/09 and 2009/10 will rise to around 350 billion baht annually from 163 billion baht in 2007/08.

The World Bank forecast last month that Thailand's budget deficit could rise to 5.9 percent of gross domestic product this year from 1.1 percent last year.

Korn said the stimulus programme would not put Thailand's fiscal discipline at risk.

"At its expected peak 3 years from now, Thailand's public debt level will be at around 58 percent of GDP. This is very comfortable compared with many other countries which have already exceeded 100 percent," he said.

Prime Minister Abhisit Vejjajiva said last week the economy could have contracted more than 5 percent in the first quarter of 2009, an estimate independent analysts agreed with, after it slid 4.3 percent in the previous quarter from a year earlier.

The central bank has predicted the economy will contract between 1.5 percent and 3.5 percent in 2009, with exports falling between 24.5 percent and 27.5 percent.

The expected contraction would be the economy's worst performance since 1998, when it was hit by the Asian economic crisis.

In an attempt to hold down the fiscal deficit, Korn's finance ministry has scaled down the total national government budget planned for 2009/2010 to 1.7 trillion baht from the 1.9 trillion baht anticipated earlier.

To boost revenue, Korn won cabinet approval on Wednesday to raise consumption taxes on whisky, beer and brandy, a move aimed at raising an additional 70 billion.



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