Thaksin wades into Thailand debt storm with bold bailout plan
Former Thailand Prime Minister Thaksin Shinawatra has reignited debate over the country’s mounting debt crisis, urging the government to buy up bad loans to help struggling households.
The 75 year old’s proposal? The state should step in, purchase non-performing loans (NPLs) from financial institutions, and wipe debt-ridden individuals off the National Credit Bureau’s blacklist. But not everyone is convinced by Thaksin’s proposal.
Thailand’s household debt has hit a staggering 16.3 trillion baht, a whopping 89% of GDP, according to the National Economic and Social Development Council. Personal NPLs alone stand at 1.2 trillion baht, making up 8.78% of total loans.
A Finance Ministry insider revealed that, unlike some other nations, Thailand lacks a bad bank – a specialised agency designed to handle toxic debt, leaving the government struggling to tackle the crisis effectively.
The official pointed to five key issues: weak decision-making, outdated financial institutions, lack of transparency, uncoordinated debt relief efforts, and sky-high household and informal debt, said a government source.
“Thai banks are strong, but the debt crisis lingers because the government doesn’t have a centralised agency with enough power.
“A bad bank could be the answer, but transparency is key, otherwise, debt relief could easily be misused.”
In the past, Thailand has tried different strategies, including asset management companies to handle bad loans.
More recently, the government launched the You Fight, We Help scheme, targeting small debtors in trouble for over 90 days. The programme offers lower instalments and an interest freeze for three years, with full interest waivers for those who meet conditions.
Despite 2.1 million accounts being eligible, representing 1.9 million debtors and 890 billion baht in debt, take-up has been lower than expected. The government extended the registration deadline from February 28 to April 30 to boost participation.
By March 12, only 1.05 million people had signed up, covering 1.3 million accounts. The programme is funded through reduced contributions from private banks and state support, pooling 78 billion baht per year, expected to exceed 200 billion baht over three years< Bangkok Post reported.
To tackle business debt, the Cabinet greenlit a draft amendment to the Bankruptcy Act last October. The law will allow small enterprises to restructure debt similarly to big corporations, enabling mediation with multiple creditors and reducing bankruptcies and asset seizures.
With debt spiralling out of control, all eyes are now on the government to see if Thaksin’s bold suggestion gains traction or remains just another political soundbite.
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