Thailand plans to borrow 500 billion baht (S$19 billion) in phases, to finance a cash handout programme to stimulate its economy, an official said on Wednesday (Nov 15), allaying concerns that the debt proposal may widen the fiscal deficit and jeopardise the nation’s credit ratings.

The borrowing will be spread over two to three years, as the shops and vendors participating in the so-called digital wallet plan will not be cashing out in one go, said Paopoom Rojanasakul, secretary to the finance minister and a member of the panel overseeing the programme.

The Public Debt Management Office, which manages Thailand’s borrowing, will carefully select the tools to fund the handout, he said.

Prime Minister Srettha Thavisin last week said the government will distribute 10,000 baht each to about 50 million Thais as a one-time measure, to stimulate consumption and spur business activities.

The move to resort to borrowing through a special bill – as opposed to budget financing as previously indicated – raised concerns about the programme saddling the nation with long-term debt and fanning inflation.

The digital wallet is part of plans by Srettha’s government to stimulate economic growth to about 5 per cent annually during his four-year term. The prime minister has repeatedly said the nation’s economy is in a crisis and in need of stimulus to end a cycle of low growth.

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South-east Asia’s second-largest economy has grown an average 1.9 per cent in the past decade, well below its neighbours such as Indonesia, Malaysia and Vietnam.

Paopoom said “a big stimulus” plan was the need of the hour to accelerate economic growth from a projected 2.6 per cent to 2.7 per cent this year and little over 3 per cent next year.

With the budget to care for the elderly rising 5 per cent annually and an ageing population, only higher growth can raise resources to support them, he said.  

“Thailand is staring at a fiscal abyss with an ageing society,” Paopoom said. “We can’t go on like this. It’s like we are holding a bomb. We need higher economic growth.”

The digital wallet programme may be ready for disbursal by May, and recipients will have six months to spend the money. Shops and vendors eligible to join the programme will have 2.5 years to cash out, and they will be given some incentives to delay reimbursement, Paopoom said.

Thailand’s credit rating faces no immediate threat of a downgrade due to borrowing for the digital wallet, as it will fuel growth and avert a surge in fiscal deficit as a ratio of GDP, Paopoom said. Rating companies also look at many other factors in their assessment, he said. 

Fitch Ratings earlier this week affirmed Thailand’s rating at BBB+ and its stable outlook. It is also rated two notches above the lowest investment grade at S&P Global Ratings that the nation has retained since 2004. BLOOMBERG