(Bloomberg) -- Thailand plans to borrow an additional 700 billion baht ($22.3 billion) to fund measures to counter the worst wave of Covid-19 outbreak to hit Southeast Asia’s second-largest economy, people familiar with the matter said.
A meeting of the cabinet chaired by Prime Minister Prayuth Chan-Ocha on Tuesday approved the new borrowing plan from the finance ministry, the people said, declining to be identified before a public announcement.
The government proposes to spend 400 billion baht of the new borrowing to help various sections of the society affected by the new outbreak, while 270 billion baht will be used to revive the economy, the people said. About 30 billion baht will be set aside to finance medical supplies and vaccines to contain the latest outbreak, they said.
The fresh borrowing can be completed before Sept. 30 next year, and is on top of an ongoing 1-trillion baht debt plan authorized by the cabinet last year to fund pandemic relief measures, they said.
Kulaya Tantitemit, a spokesperson for the Finance Ministry and head of its Fiscal Policy Office, declined to comment. Anucha Burapachaisri, a government spokesman also declined to comment.
Thailand’s public debt-to-gross domestic product ratio may rise to 58.6% by September with the additional borrowing, but would still be below the nation’s 60% debt ceiling, the people said. The government will need to issue an emergency law that needs to be endorsed by the king before the public debt management office can begin raising fresh debt, they said.
Standard Chartered Bank Plc expects a Prayuth-led fiscal policy committee to raise the debt ceiling to 65% of the GDP by year end when a clearer picture of the domestic Covid situation and effectiveness of fiscal measures in the short- and medium term is expected to emerge. Additional borrowing may be through existing instruments including treasury bills, promissory notes and savings bonds, Tim Leelahaphan, Bangkok-based economist at the bank, said in a note Wednesday.
The yield on 10-year Thai government bonds rose four basis points to 1.82%, while the benchmark SET index of stocks rose 0.1%, set for a second day of advance. The baht rose 0.1 to 31.422 to a U.S. dollar, poised to snap six days of losses, according to data compiled by Bloomberg.
Thailand, which is grappling with the deadliest Covid wave to hit the nation so far, slashed its growth outlook for this year earlier this week, citing the delay in reopening borders to foreign tourists and slow vaccination. The economy may expand between 1.5% and 2.5% this year, less than the 2.5%-3.5% forecast in February, the National Economic and Social Development Council said Monday.
The country’s budget deficit soared almost 17% in the first half of the fiscal year that began in October as revenue tumbled, prompting the government to almost triple borrowing to meet the shortfall. The cabinet this month gave in-principle approval for a $7.2 billion assistance package that included short-term financial relief for those affected by the virus, as well as measures to stimulate consumption once infections abate.
Thailand has imposed curbs on businesses and travel to contain the resurgence in the pandemic that seen the nation’s total caseload almost quadruple since the start of April. The country has vaccinated only about 2% of its population, trailing the pace of countries like Indonesia, Malaysia and Singapore.
(Updates with market reaction in eighth paragraph.)
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