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Published on July 17, 2007

Meanwhile, critics at a seminar yesterday expressed concern about budget constraints caused largely by previous off-budget spending projects.

Finance Ministry spokesman Somchai Sujjapongse yesterday said the government ran a cash-flow deficit of Bt189.7 billion between last October and last month.

However, there was a surplus cash flow of Bt54.4 billion last month, due to revenues from corporate income tax.

Although cash flow does not fully reflect actual fiscal position, the Finance Ministry does not expect the shortfall in government revenues to worsen as feared.

Somchai said the higher rate of budget disbursement over the last nine months, up 12.7 per cent year on year, could be attributed to a higher cash-flow deficit. Total spending was Bt1.15 trillion, comprising disbursement of the current fiscal year's Bt1.06 trillion, plus Bt89.53 billion carried over from fiscal 2006.

The budget disbursement represented 68 per cent of planned expenditures of Bt1.566 trillion in fiscal 2007.

Inflows to government coffers in the first nine months also increased 5.9 per cent year on year to Bt1.05 trillion.

At yesterday's seminar, researchers and critics said they were concerned about budget constraints, due to the unsound policies of past governments that initiated special funds, quasi-fiscal policies, special-purpose vehicles and other off-budget spending. Off-budget spending boomed in particular during the Thaksin Shinawatra government, with many populist policies initiated.

Fiscal Policy Office researcher Boontree Kositanurik said although the ratio of public debt to GDP might be kept below 50 per cent, off-budget spending and other fiscal burdens had already squeezed investment spending in the current and next fiscal years.

The fiscal burden is lower, because spending on investments has been lower than the benchmark of at least 25 per cent, she said.

Capital spending is 23.91 per cent and 24.1 per cent of the budget for fiscal 2007 and fiscal 2008, respectively, she added.

Finance Minister Chalongphob Sussangkarn conceded during the seminar that the country's Cabinet often made decisions based on insufficient information of the true state of the Kingdom's financial position.

"The Cabinet often makes a decision about micro-matters like spending on a specific project but never knows the macro-picture of government revenues," he said.

Chalongphob promised to create an effective fiscal monitoring system, in order to allow outsiders and others to monitor government spending, which would require information disclosure.

Vorapol Socatiyanurak, an adviser to Chalongphob, said the Finance Ministry would need to play a more active role in stabilising the currency. The new Public Debt Act will allow the ministry to raise funds for bond-market development, and the ministry could use the funds to help the central bank stabilise the exchange rate, such as by buying US dollars to stem the baht's appreciation.

Wichit Chaitrong

The Nation