Academics warned the government on Wednesday about implementing former prime minister Thaksin Shinawatra's proposal to address household debt, saying it may not solve the underlying issue and could even backfire.
They acknowledged that Thaksin's government-led household debt buy-back programme is feasible but cautioned it could be a double-edged sword if implemented alone.
Under the initiative, the government would organise to purchase individuals' debt from the banking system and allow them to repay it gradually.
Without requiring full repayment, the government would then help individuals rebuild their lives by removing their names from the National Credit Bureau (NCB), freeing them from debt and giving them a fresh start.
This initiative would not rely solely on government funds, as it could be financed through private investment, according to Thaksin.
Assoc Prof Wichai Witayakiattilerd, a lecturer at Thammasat University's Department of Mathematics and Statistics, said that given the amount of household debt in Thailand, allowing asset management companies (AMC) to purchase bad debt from financial institutions instead of using state funds would be a more appropriate approach.
The level of household debt in the nation currently stands at 15.54 trillion baht, with non-performing loans (NPLs) accounting for 4%, or around 620 billion baht, the academic said.
He estimated that if an AMC is to buy bad debt at an average discount of 35%, which he described as a normal market mechanism, it could inject between 120 and 210 billion baht into the system, boost GDP by 1.5 times and reduce bad debt by at least 50%.
He suggested the scheme should target low-income earners with debts below 500,000 baht rather than applying to all debtors as a blanket policy. However, he warned the programme carries risks if consumers do not change their financial behaviour and improve discipline.
Nonarit Bisonyabut, a senior research fellow at the Thailand Development Research Institute (TDRI), said he disagrees with the proposal as it would provide only short-term relief instead of addressing the underlying issue.
He said the current situation involves rising debt that makes banks more cautious about lending, and people hoarding money. This restricts money circulation and affects overall economic activity.
"The proposal may offer a quick fix by immediately reducing household debt. However, it fails to address the deeper structural problems," he said.
Mr Nonarit said the issue may resolve itself if the financial system makes the proper adjustments.
The Bank of Thailand (BoT) said on Wednesday it is awaiting clarity on the policy.
In addressing household debt sustainably, the central bank said it focuses on promoting sound financial discipline to prevent moral hazards, ensuring debtors can access future credit at fair costs.
Given the complexity of Thailand's household debt, solutions require collaboration from various sectors, it said.
People's Party (PP) MP Sirikanya Tansakul said she doubted Thaksin's proposal would be effective as much of the debt is in the informal sector, while commercial banks stand to benefit the most.
She said debtors might delay repayments, expecting the government to step in.
She also questioned whether an AMC has the financial resources to purchase the debt if government funding falls short.
"I'm not sure what method will be used to help the people. Perhaps the media should ask Thaksin again."
