BoT opposes cash handout scheme, urges help for those in need

The Bank of Thailand (BoT) firmly opposes the digital wallet cash handout initiative proposing a 500 billion baht cash distribution to nearly all adult citizens to boost consumption, emphasising that it would be more beneficial to directly assist those in need.

Private consumption is expected to grow by about 4% this year following a record 7% increase last year. However, BoT Governor Sethaput Suthiwartnarueput stated there is no necessity for a broad-based stimulation of demand.

Sethaput suggested the digital wallet scheme, currently promising 10,000 baht to each of the 50 million Thai citizens aged 16 and older, should be limited to the 15 million welfare cardholders.

His remarks align with the BoT’s previously stated views. However, the timing is likely to strain government relations further, which are already tense over the central bank’s monetary policy and inflation targets.

Prime Minister Srettha Thavisin’s administration has encountered numerous funding questions and rollout delays for the digital wallet scheme.

The Bangkok-born PM has largely ignored opposition to the programme, promoting it as a means to revive Thailand’s economy from prolonged sluggish growth, meanwhile, Sethaput still questions the motives behind the scheme.

No need

“If you want to do the scheme, it is better to do it in a targeted way and also a smaller way… we don’t see the need to try to stimulate consumption across the board.”

Despite a boom in private consumption driven by tourism recovery, Sethaput pointed out that vulnerable and lower-income households continue to suffer from the pandemic’s impact, requiring targeted support.

Limiting the digital wallet to welfare cardholders, those earning below a certain income level and eligible for various state subsidies would be a more responsible move.

The digital wallet, a key election promise of the ruling Pheu Thai party, has faced controversy over the government’s fluctuating financing strategy. Initially, the plan aimed to cover approximately 55 million Thais using the state budget. However, Srettha’s Cabinet later decided to exclude affluent Thais and finance it through one-off borrowing.

Potential legal challenges and warnings from the country’s anti-graft agency have forced the government to reconsider its funding options. The Thai premier has committed to distributing the cash in the final quarter of this year, although funding uncertainties persist.

As the banking regulator, the BoT has advised the government to ensure that borrowing 172 billion baht from the Bank for Agriculture and Agricultural Cooperatives (BAAC) to fund the digital wallet does not compromise the lender’s safety and liquidity.

Sethaput highlighted significant uncertainties surrounding the digital wallet, noting that the BoT’s growth forecasts for this year and the next, at 2.6% and 3% respectively, do not factor in the programme’s impact.

He assured that Thailand’s economic growth would return to its potential of 3% even without the cash handout, indicating that the monetary policy path would remain unchanged if the programme failed to materialise. reported Bangkok Post.