Thailand adopts deficit budget

Thailand's army-appointed parliament began a one-day debate on Wednesday on a 2007/08 deficit budget aimed at reversing a slowdown of economic growth and giving a hefty boost to defence spending.
The budget bill, introduced in parliament by Prime Minister Surayud Chulanont, included a 24.3 percent annual rise in defence spending for the year starting October 1, the second hefty raise in a row after a 33.8 percent rise a year earlier.
The bill provided little detail of why the military, which ousted Prime Minister Thaksin Shinawatra in a bloodless coup last September, wanted more money. But the army is fighting an insurgency in the Muslim-majority far south in which more than 2,300 people have been killed since it began in January 2004.
The proposed 143 billion baht ($4.2 billion) military spending will amount to 8.6 percent of the budget, compared with a 18.2 percent allocation to the Education Ministry. Surayud's budget speech barely touched on the southern insurgency, mentioning it only in passing.
"The government will raise the efficiency of intelligence and operations of the National Intelligence Co-ordination Centre, integrate efforts of resolving security problems in border provinces in the south so as to boost public trust in government security enforcement," he said.
The budget bill says the army and national police would spend a combined 143 billion baht next year, while other government agencies would have another 9 billion baht to improve security operations in the south. Surayud said Thailand's economic outlook was brighter for next year with inflation mild and interest rates down to 3.5 percent after four cuts this year.
The budget bill was based on expectations that gross domestic product would grow around 5 percent in calendar 2008 after projected 3.8-4.8 percent growth in 2007, the least in six years. "The deficit fiscal policy reflects a government objective to achieve sustained economic growth by providing essential public expenditure that takes into account fiscal disciplines and economic stability," Surayud said.
The economy remained healthy despite political uncertainty after the coup last year and ahead of a general election promised for late 2007, he said. "National financial positions can be regarded as sound with foreign reserves amounting to more than three times short-term debt," he said.
The 1.66-trillion-baht budget bill for 2007/08 includes a planned fiscal deficit of 165 billion baht, down from an expected 170-190 billion baht in the current year, as slower economic growth meant tax revenue targets were not met.
About 9.9 percent of expenditure next year would be financed mainly by domestic borrowing, up from 9.3 percent this year, it said. The new budget bill is due to get final parliamentary approval in early September and take effect on October 1.