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NEWS UPDATES Asean Affairs    8 June 2012

World Bank  worried about slow Thai govt spending

08 June 2012

The World Bank and top officials at the Finance Ministry of Thailand are less worried about rising public debt than about slow spending on investment projects such as infrastructure.

The challenge for Thailand is how investment outlays could be speeded up as timely responses to changing conditions, said Annette Dixon, World Bank country director for Southeast Asia, in response to a question of whether the Bank was concerned about the Kingdom's rising public debt.

She made the remark during yesterday's launch of the Public Expenditures Management Network (PENMA) in Asia.

PEMNA is aimed at providing opportunities for public financial-management practitioners across the region to share their knowledge and experiences in implementing reforms in their field, and to learn from the successes and challenges of others.

The government plans to run a fiscal deficit of 400 billion baht (US$12.5 billion) this fiscal year and 300 billion baht ($9.4 billion) next year. It also plans to borrow an extra 400 billion baht to finance flood-prevention projects and a natural-disaster insurance scheme.

Therefore, the government will borrow about 1 trillion baht ($31 billion), close to 10 per cent of gross domestic product. The new borrowings will add to the current public debt of 40 per cent of GDP.

Pongpanu Svetarundra, deputy permanent secretary of the Finance Ministry, said the country could increase public debt to a relatively safe level of 60 per cent of GDP.

He agreed with Dixon's view that governments often run into the problem of slow budget disbursement, especially investment on infrastructure mega-projects.

"Big projects are complicated, as there are many agencies involved - the Budget Bureau, the Finance Ministry and the National Economic and Social Development Board - and many procedures to follow such as government procurement," Ponpanu said.

Robert Taliercio, lead economist at the World Bank, said quick numbers could not be found to use as standard levels of public-debt-to-GDP ratio in low-, middle- and high-income economies. The level of appropriate debt varies, since there are many factors involved, he said.

Kim Dong-yeon, South Korea's vice minister of strategy and finance, told the participants at the PEMNA workshop that his country planned to balance the budget next year.

He said his government was successful in managing public finance, embracing principles of transparency and accountability.
The Korean government used expansionary fiscal policy from 2008 to 2010 to restore economic growth after being hit hard by the global financial crisis, Kim said.

In 2008, Seoul's debt-to-GDP ratio was 30.1 per cent, less than half of the Organisation for Economic Cooperation and Development average of 79.7 per cent, he said. Its fiscal balance was negative-1.1 per cent of GDP, a healthier ratio than the average OECD level of negative-3.4 per cent.

Because of low public debt, the Korean government was able to increase spending during the 2008 global crisis, he added.

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