BANGKOK Feb 7 Thailand's inability to form a
new government has left the country facing a slow-burn budget
crisis, with a costly rice-buying scheme close to collapse and
public investment plans that were meant to support the flagging
economy under threat.
Prime Minister Yingluck Shinawatra has led a caretaker
administration since December, when she called a snap election
in a bid to end protests that have shut down parts of the
capital and with it much of normal government business.
But the demonstrations have continued, and protesters were
able to disrupt voting in enough places to prevent a new
administration being installed after the poll on Feb. 2.
"The fiscal budget plan has not started yet. We haven't seen
this situation before," Manas Jamveha, director general of the
Comptroller General's Department, told Reuters.
"We have to wait for a new government and its policies
before proceeding on a budget framework."
By law, a caretaker government can only embark on new
spending with the approval of the Election Commission and it
cannot initiate projects that commit the incoming government.
According to the Budget Bureau, ministers should have set a
budget outline by Jan. 28 for the fiscal year starting in
October. Details should be thrashed out in April and the budget
sent to parliament in May.
But with the opposition challenging the legality of the poll
and dozens of by-elections needed to fill vacant seats, It may
be weeks, or even months, before Thailand has a proper
Most urgent is the rice-buying scheme, which was a
cornerstone of the populist platform that won Yingluck a
landslide election victory in 2011 but in recent weeks has all
but collapsed due to cash problems.
The cost of the scheme, which guaranteed farmers an above
market price, has fuelled protests in Bangkok. Big banks have
refused to offer bridging loans to keep it afloat, unconvinced
the government has the authority to seek them.
Some farmers have not been paid for their rice for months
and the scheme lapses at the end of February, when the current
crop ends. Similar schemes have been routinely rolled over for
decades, but not this year.
"These payment problems stem from the dissolution of
parliament, which made it difficult under the framework of the
law to approve payments," Yingluck, who will almost certainly be
declared the winner of the election if is not annulled by the
courts, told reporters on Wednesday. "Whether this scheme is
extended or not is up to the next government."
The protest movement has been trying since November to force
out Yingluck and install an unelected administration to ram
through political and economic reforms, with the objective of
reducing the influence of her brother, former premier Thaksin
Shinawatra who was ousted in a 2006 coup.
GROWTH FORECAST SLASHED
Many government ministries have been closed for weeks
because of the protests, with civil servants working from home
or back-up facilities. Many from the Commerce Ministry, for
example, have relocated to a royal arts and craft centre north
of Bangkok and on Monday officials held the monthly inflation
briefing in a restaurant.
As protest numbers dwindled this week, some ministries have
tentatively reopened. But policymaking remains restricted.
Brokerage Thanachart Securities has slashed its economic
growth forecast for 2014 to 2.0 percent from 3.2 percent because
of the likely fall in government spending, as well as delays to
both public and private investment.
"Our expectation of a reduction in populist spending,
especially on the massive rice scheme, forces us to lower our
consumption growth assumption this year from flat growth to
negative growth of 1.2 percent," said its head of research,
Pimpaka Nichgaroon, noting that consumption in Thailand accounts
for around half of GDP.
A centrepiece of the government's economic policy - set to
increase growth by one percentage point in a full year, it said
- was a 2 trillion baht ($61 billion) infrastructure programme
focused on mass transit and high-speed rail networks.
Ministers approved related borrowing in March 2013 but it
was contested by the parliamentary opposition because it was
off-budget and the case has been mired in the courts. It now
seems unlikely the work will begin any time this year.
State-owned Electricity Generating Authority of Thailand
(EGAT), the country's largest power producer and operator of the
national grid, said this week a $515 million infrastructure fund
might be delayed if a new government was not formed soon. It
needs the money for new power plants and transmission lines.
A planned power station in southern Krabi province must
await approval from the next government.
Public investment and infrastructure account for about 30
percent of total cement demand, so big suppliers are concerned.
"If the government is unable to approve new infrastructure
projects, new public spending will not happen. That will drag
down the overall sector," said Kan Trakulhoon, chief executive
of Siam Cement Pcl.
($1 = 32.7600 Thai baht)
(Additional reporting by Khettiya Jittapong, Amy Sawitta
Lefevre, Apornrath Phoonphongphiphat, Kitiphong Thaichareon and
Boontiwa Wichakul; Writing by Alan Raybould; Editing by Alex