Thailand's draft government budget for 2007
By Jon Fernquest[Introduction | Vocabulary | Article | Reading Questions | Answers]
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The cabinet has issued a draft government budget for the fiscal year 2007 this week. The National Legislative Assembly will consider the draft budget on December 6th.
This is an good opportunity to get an overall big picture of how the government spends money. To get this "big picture" comparisons have to be made.
As the government budget story develops over the next few weeks, we'll look for answers to questions such as:
1. What are the relative amounts of money spent by the government on healthcare, education, agricultural subsidies, defence, and the police?
2. What percentage of GDP is government spending? How much of a budget deficit does the government currently run? How much of a budget deficit was there in the past?
3. How much income redistribution from the rich to the poor did the Thaksin administration's budget have built into it?
4. How does all this compare with other Asian governments? How does it compare with western governments?
Today, you'll have to have your calculator ready, since you'll have to add numbers together to understand how the government's budget is put together.
Reading Questions
Here are some questions to guide your reading (See answers at end):1. What debts are being offset or paid off in the 2007 budget?
2. What is the total value of the 2007 government budget?
3. What percentage are the populist programme debts of the total budget?
4. Was this populist programme debt a transparent of the Thaksin administration's budgets?
5. How will the "hidden debt buildup" for populist programmes be addressed?
6. Why must it be paid off?
(Hint: Use inference)
7. What programmes did the hidden populist programme debt of the Thaksin administration go towards? In what percentages?
8. Who criticised Thaksin administration for populist spending?
9. Why were populist spending programmes critised?
10. What other Thaksin administraion programmes were cancelled after the coup?
11. What percentage of the government budget will the Village Fund Programme be in 2007? Is this high? Is this too much?
12. What large-scale categories of government spending can the government budget be split into?
13. How does Thailand's budget deficit compare with neighboring countries such as Malaysia and Singapore?
With South Korea, Japan, the US, France, and Great Britain? Compare both this year's budget deficit and the cumulative deficit as percentages of GDP? (Note this requires additional library or internet research)
Bangkok Post Article: November 16, 2006
Fiscal 2007budget up by B40bn
Hike to offset debts from populist schemes CHATRUDEE THEPARAT, PRADIT RUANGDIT, and AMPA SANTIMATANEDOLThe cabinet yesterday raised the fiscal 2007 budget by 40 billion baht to offset debts incurred by populist policy programmes initiated under the Thaksin Shinawatra administration.
M.R. Pridiyathorn Devakula, finance minister and deputy prime minister, said that the overall 2007 spending budget would be set at 1.56 trillion baht, up from 1.52 trillion baht earlier.
"The hidden debt build-up over the past three or four years that has now become a problem must be addressed,'' M.R. Pridiyathorn said.
The additional funds would include 18 billion baht to cover a debt owed to the Bank for Agriculture and Agricultural Co-operatives for a rice price intervention programme.
Another 7.7 billion baht would go to the 30-baht universal health care programme, 7.1 billion to a price intervention programme for rubber farmers, and 8.8 billion to cover the cost of salary hikes for teachers under the Education Ministry.
The Thaksin administration had come under heavy criticism from some analysts and economists for its heavy populist spending to maintain voters' support.
Costly programmes such as the Bangkok Fashion City project, the Ua-athorn low-cost housing project and the village investment fund scheme have since been cancelled by the interim government installed after the Sept 19 coup, or are under review for alleged corruption.
M.R. Pridiyathorn said the government would abide by existing commitments to the village fund programme, with 13 billion baht allocated in fiscal 2007 and another 16 billion for 2008 and 2009.
The new budget also contains allocations for new infrastructure megaprojects, including five new mass transit routes planned for Bangkok that are expected to begin construction in late-2007.
M.R. Pridiyathorn said the fiscal budget projected revenues at 1.42 trillion baht, with a projected deficit of 146 billion baht.
New government bonds worth 46.21 billion baht would be issued to cover the deficit, with the remaining 100 billion baht to be offset through short-term borrowing.
The budget deficit is projected at 1.72% of gross domestic product, with the public debt remaining at around 41% of GDP.
Of the overall budget, 1.13 trillion baht would go to current expenditures, including salaries for the civil service, 379.8 billion for state investment and 55.49 billion for repayment of loans.
M.R. Pridiyathorn said the government slashed some budget items from the preliminary draft, including allocations for the CEO governors and the government's contingency budget. The budget was based on an economic growth estimate of 4.5% to 5.5% for 2007.
M.R. Pridiyathorn said the government was giving priority to government agencies' human resources development and social development projects in its 2007 budgeting. The budget earmarked for these two categories accounts for 593 billion baht, or 37.9% of the total.
Security and good governance activities gained second priority with an accumulated budget of 343 billion baht, equivalent to 22% of the spending, he said.
The National Legislative Assembly will consider the draft on Dec 6.
Social Development and Human Security Minister Paiboon Wattanasiritham said most of the social development budget would go to the Public Health and Education ministries. His ministry would only receive an additional budget for the Ban Mankhong scheme which offers low-interest loans to help people finance the construction of their houses.
However, Education Minister Wijit Srisa-arn said that although the ministry's budget for the next fiscal year would rise by 50 billion baht, most of it would go to help repay teachers' debts.
Vocabulary
a big picture of x - the overall description of how something works and why it works that way (not getting lost in details)
fiscal - related to government spendign and taxes
the fiscal year - the 12 month year used by the government and business for budgeting, accounting, and reporting financial performance (also called the "financial year")
government budget deficit - when government spending is greater than government income from taxes
hike - raise, increase
offset - move in the opposite direction, reduce by moving in the opposite direction ("x offsets y" means "x reduces the effect of y")
incurred by - a financial transaction was made by (for example "expenses incurred by" or "debts incurred by")
populist - claiming to represent and defend the rights of the common people (note that the claim may not match reality, populist political platforms can also be used for personal gain)
populist policy programmes - the name commonly given to initiatives started by teh Thaksin administration that provide benefits to the poor such as 30 baht healthcare, agricultural subsidies, funding of village projects, or salary increases for teachers
Bank for Agriculture and Agricultural Co-operatives (BAAC) - Thai government bank specialising in microfinance and banking for farming households (See website, a case study [pdf], at the FAO)
universal healthcare programme - the 30 baht healthcare program of the Thaksin administration
price intervention programme - the Thaksin administration's programme of offering much higher than market price for rice and other agricultural produce, effectively providing a subsidy to someone, farmers or middlemen
salary hikes - salary increases
Bangkok Fashion city project - the Thaksin administration's project for promoting Thailand's fashion industry
village investment fund scheme, village fund programme - "the village fund scheme provided one million baht to each village as a revolving fund, managed by a village-level committee that could normally make loans of up to 20,000 baht per debtor. Some 71,102 villages and 2,339 urban communities qualified to enter the scheme, adn 5.3 million loans were made by September [2001], mostly for agricultural production or local commerce" (Pasuk, 2004, The Business of Politics in Thailand, p. 93, citing Worawan Chandoevwit, 2003, "Thailand's Grass Roots Policies," TDRI Quarterly Review, 18, 2)
interim - temporary (only used until a permanent one can be established)
interim government - temporary government (until elections are held for a permanent government)
alleged - claimed but not yet proven to be true
abide by - follow a rule or law
committments - things you have agreed to do
slashed - cut, amount in budget eliminated or reduced
preliminary draft - draft of the draft that will be submitted to the National Legislative Assembly
Ban Mankhong scheme - the Thaksin adminsitration's programme of low interest rate government subsidised loans for home construction
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Answer Key:
1. What debts are being offset or paid off in the 2007 budget?
Debts incurred under the populist programmes of the Thaksin adminsitration.
2. What is the total value of the 2007 government budget?
1.56 trillion baht.
3. What percentage are the populist programme debts of the total budget?
0.04/1.56 = 2.6%
4. Was this populist programme debt a transparent of the Thaksin administration's budgets?
No, it was a "hidden debt build-up over the past three or four years."
5. How will the "hidden debt buildup" for populist programmes be addressed?
It will be paid off. ("offset")
("The cabinet yesterday raised the fiscal 2007 budget by 40 billion baht to offset debts incurred by populist policy programmes initiated under the Thaksin Shinawatra administration.")
6. Why must it be paid off?
(Hint: Use inference)
Because it is hidden (not transparent).
The reason is not explicitly given, but "hidden" is the key word of criticism here.
7. What programmes did the hidden populist programme debt of the Thaksin administration go towards? In what percentages?
a. (18 billion baht) - To BAAC bank for rice price intervention
b. (8.8 billion) For teacher salary increases
c. (7.7 billion baht) For 30-baht universal health care
d. (7.1 billion) For Rubber price intervention
8. Who criticised Thaksin administration for populist spending?
Some analysts and economists.
9. Why were populist spending programmes critised?
Because spending was being used to maintain voter support.
10. What other Thaksin administraion programmes were cancelled after the coup?
a. The Bangkok Fashion City Programme
b. Ua-athorn low-cost housing project
c. The Village Fund Programme
11. What percentage of the government budget will the Village Fund Programme be in 2007? Is this high? Is this too much?
8.3% = .13/1.56
Whether this is high or too much obviously depends on your opinion and is a good subject for debate. An informed debate would have to have a clear picture of what exactly the Village Fund Money was being used for and whether money was being skimmed off the top by officials along the way.
12. What large-scale categories of government spending can the government budget be split into?
72% - 1,130 trillion - Salaries
24% - 379.8 billion - Investment
1% - 55.49 billion - Repayment of loans
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100% - 1,565.29 - Total
Or:
37.9% - 593 billion - Human resources and social development projects
22% - 343 billion - Security and good governance
40% - 626 billion - Other
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100% 1,565.29 - Total
13. How does Thailand's budget deficit compare with neighboring countries such as Malaysia and Singapore?
With South Korea, Japan, the US, France, and Great Britain? Compare both this year's budget deficit and the cumulative deficit as percentages of GDP? (Note this requires additional library or internet research)
