The ratio of interest burden to estimated government revenue is projected to increase to 11% next year from 8% in 2024, should the government proceed with its flagship digital wallet handout.
According to a source from the Finance Ministry who requested anonymity, the current ratio is 8%, which corresponds to an A rating based on international credit rating agencies' standards.
However, if the ratio increases to 11% as expected, it would downgrade the credit rating to BBB+, equivalent to the country's current sovereign credit rating.
The source said in 2019 the ratio of interest burden to government revenue was relatively low at 6%, attributed to effective management of borrowing costs by the Public Debt Management Office.
However, during the pandemic in 2020-2021, the government issued two emergency decrees for borrowing totalling up to 1.5 trillion baht to mitigate the impact of Covid-19 outbreaks. This increased the ratio to 8%, close to the government management framework ceiling of 10%.
The incumbent government plans to utilise funds from the fiscal 2024 and 2025 expenditure budgets, including funds from Section 28 of the State Fiscal and Financial Discipline Act, for its digital wallet project estimated to cost 500 billion baht.
The government also decided to increase the budget deficit for fiscal 2025 by 152 billion baht, pushing up state borrowing to offset the deficit that year to 865 billion baht, or 4.42% of GDP.
This increase in the budget deficit for 2025 will raise the government's interest burden to 11% in that year from 8%, the source said.
Overall management of the government's public debt is considered to be within the framework of financial discipline set by the State Fiscal and Financial Discipline Committee, chaired by the prime minister, which stipulates the government's debt-to-revenue ratio should not exceed 35%.
As of September 2023, the ratio was 26%.
The ratio of foreign currency-denominated debt to total public debt should not exceed 10%, and as of September 2023, the ratio was 1.4%.
In addition, the ratio of foreign currency-denominated debt to revenue from goods and service exports should not exceed 5%, and as of September 2023, it was 0.05%.
As of February 2024, total public debt tallied 11.3 trillion baht, equivalent to 62.5% of GDP.
According to the edited medium-term fiscal plan released in January, the proportion of the government's debt repayment budget to the expenditure budget has increased every year, with the rate at 10.5% for fiscal 2023, 11.0% for fiscal 2024, and is expected to gradually increase to 13.3% by 2028.