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BANGKOK, September 21 (Reuters) – Raising Thailand’s public debt ceiling will give flexibility in the implementation of policies to deal with the coronavirus and support the economy, as fiscal measures are still needed, the central bank said on Tuesday.
The government on Monday raised the debt ceiling to 70% of gross domestic product (GDP) from 60%, which allowed it to raise more funds to help a declining economy, with key tourism sector still struggling .
The risk to fiscal stability is low because the new debt ceiling is not too high and most of the public debt is domestic with borrowing costs, Deputy Governor Mathee Supapongse said in a statement.
“Raising the debt ceiling does not mean that the government will have to borrow to reach the ceiling but to increase flexibility in the implementation of measures,” he said.
“Tax measures must still play a key role in supporting the decline in people’s incomes and helping the economy to recover quickly.”
The government’s current plan is to borrow 500 billion baht ($ 14.98 billion) to support the recovery, so the debt-to-GDP ratio is already expected to be above 60% next year from 55.6% currently, he said.
However, there is enough liquidity in the system to support future government bond issues and the central bank will work closely with the finance ministry for smooth and efficient fundraising, Mathee said.
The central bank forecast Southeast Asia’s second-largest economy to grow 0.7% this year, after contracting 6.1% last year.
($ 1 = 33.38 baht)
(Report by Orathai Sriring and Satawasin Staporncharnchai edited by Ed Davies, Martin Petty)
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