Former prime minister Thaksin Shinawatra remains a magnet for attention as he shapes government policies.
He recently proposed the government purchase non-performing loans (NPLs) from financial institutions to address the long-standing household debt crisis and remove individuals from the National Credit Bureau’s blacklist.
According to data from the National Economic and Social Development Council, in the third quarter of 2024 Thailand’s household debt was 16.3 trillion baht, accounting for 89% of GDP.
In terms of debt quality, personal NPLs tallied 1.2 trillion baht, representing 8.78% of total loans.
However, Thailand still lacks a specialised agency to tackle public debt issues such as a “bad bank”, which limits the government’s ability to resolve this crisis effectively, according to a Finance Ministry official who requested anonymity.
The official said there are five reasons why Thailand has struggled to effectively address its debt crisis: a lack of decisiveness in implementing bold and stringent measures; a financial institutional structure that is inadequate, requiring reforms to encourage debt restructuring; insufficient transparency on debt management and the public disclosure of information; uncoordinated debt resolution efforts, highlighting the need for a single dedicated agency to manage all debt-related matters; and high household and informal debt levels, requiring urgent household debt restructuring and stricter controls on informal lending.
“Thai banks have strengthened, but the debt issue persists because the government’s debt management system still lacks a specialised agency with sufficient authority, such as a bad bank, while the debt restructuring law is delayed,” said the source.
“Transparency is crucial to ensuring that debt relief measures reach the actual debtors, preventing misuse and misallocation of resources.”
In the past, Thailand has employed various approaches for tackling debt issues, including establishing asset management companies, separating non-performing assets from the banking system to improve debt restructuring efficiency, and leveraging the private sector to buy and manage debt to enhance effectiveness and reduce the government’s financial burden.
The government’s latest measure to address household debt is the “You Fight, We Help” programme, which provides assistance to small-scale debtors who have been delinquent for more than 90 days or are classified as NPLs by financial institutions.
The support includes reducing instalment payments and suspending interest for three years. If debtors meet the programme’s conditions, the state waives the suspended interest.
There are 2.1 million accounts eligible for the “You Fight, We Help” programme, representing 1.9 million debtors with a total debt of 890 billion baht.
However, since the launch of the programme late last year, the number of participants has been lower than expected, prompting the government to extend the registration period from Feb 28 to April 30.
As of March 12, 1.05 million individuals had registered for the programme, with a total of 1.3 million accounts. The programme is funded by a reduction in contributions from private financial institutions to the Financial Institutions Development Fund, as well as funds jointly provided by financial institutions, amounting to 78 billion baht annually. For the three-year programme, total funding should exceed 200 billion baht.
To address small business debt, the cabinet approved a draft amendment to the Bankruptcy Act in October last year, providing additional avenues for small enterprise borrowers to enter the debt rehabilitation process, similar to the business restructuring for corporate debtors.
This process allows for debt mediation with multiple creditors at once, which could help reduce the number of debtors who would otherwise be forced into bankruptcy proceedings and asset seizures with no other options.
The draft legislation also protects the rights of all creditors, ensuring they benefit from a thorough debt repayment process.
Moreover, creditors will receive more in debt repayment than the value obtained from asset seizures, creating fairness for both debtors and creditors.
The principles of this draft law are considered crucial for a more comprehensive solution to the debt problem, according to the official.