JAN 10, 2024
Thailand to move forward with $14 billion digital wallet program
Thailand's government has recently secured approval for a $14 billion digital handout program as part of its economic recovery strategy.
The program hasn’t come about without considerable debate and a backdrop of concerns expressed about the Southeast Asian nation's sluggish economic growth. According to Reuters, the decision was confirmed by Deputy Finance Minister Julapun Amornvivat, who stated that the Office of the Council of State, an advisory panel, found no legal obstacles to utilizing state budget funds for the initiative.
Digital handout program
The digital handout program, a key policy of the ruling Pheu Thai party, involves distributing 10,000 baht (approximately $300) to digital wallets set up for each of the 50 million Thai citizens. This financial injection aims to stimulate spending within local communities, providing a much-needed boost to the economy.
While the program has faced concerns about potential inflation risks due to Thailand's slow economic growth, the government has argued that it will ultimately benefit the economy. Julapun emphasized that the government plans to proceed with the scheme in May, funded through borrowing.
Council of State and opposition party concerns
Earlier reports had indicated that the Council of State had initially advised against the government's plan to enact a loan bill for the digital wallet scheme. Concerns were raised about potential violations of constitutional articles, including Article 140, which requires the government to offset any loans outside the budget bill in the next fiscal budget.
In addition to inflation worries, the opposition expressed concerns about a potential breach of Article 53 of the 2018 State Fiscal and Financial Discipline Act, which permits off-budget borrowing only in urgent situations. Despite these concerns, the Office of the Council of State ultimately found no reason to prohibit the cabinet from borrowing to fund the program.
Thailand's move towards a $14.3 billion cash handout program, termed the "digital wallet" program, is expected to commence by May. Prime Minister Srettha Thavisin affirmed this timeline after the Council of State's approval. The program, allowing Thais to receive funds via a mobile app, aims to spur consumption and overall economic growth.
Election campaign giveaway
The idea of the digital asset giveaway was first floated by the Pheu Thai Party (PTP) in April of last year as part of its election manifesto. Subsequently, the party won the election in August, with Srettha being installed as Prime Minister. That appointment was interpreted as being a positive one by crypto advocates, given that Srettha had worked with crypto and blockchain-related technologies in his previous business dealings.
Critics, including some economists and former central bank governors, argue that the handout plan could be fiscally irresponsible and fuel inflation. Prime Minister Srettha, who is also the finance minister, plans to discuss the stimulus plan and related matters with the central bank governor.
The Thai Chamber of Commerce anticipates a 3% year-on-year growth in the first quarter of 2024, with an annual growth rate of 3.2%, driven by tourism and exports. The digital wallet scheme, if implemented as planned, could potentially add 1.0-1.5 percentage points to this year's growth, according to the chamber.