Prime Minister Paetongtarn Shinawatra on Tuesday defended an idea floated by her father, former prime minister Thaksin Shinawatra, to address the household debt problem by allowing private companies to buy and manage debt from the banking system.
“The idea [to solve the household debt problem] comes from a person who has good intentions for the country. Don’t try to politicise the matter,” the premier implored.
Ms Paetongtarn is due to face a censure motion in the House next week, and while her father cannot be mentioned by name, the opposition aims to show how the influence of a certain outsider can be seen in numerous decisions made by her government.
She said she needed to discuss the debt idea with her advisers and the ministers concerned. She noted that it would also have to be presented to the cabinet for consideration.
“There are still many procedures to follow. This is not an attempt to dominate or wield influence over [the government]. It is just an idea from someone knowledgeable,” she said. “We will not stand in the way of anything that benefits the country.”
Thaksin floated the idea while helping campaign for a candidate running for mayor in Phitsanulok province in the North on Monday.
The de facto leader of the governing Pheu Thai Party said the country has long been plagued by household debt.
He suggested that private companies should be allowed to buy all debts owed by people to commercial banks, and debtors should be allowed to pay off the debts owed to their new creditors gradually.
“People would not have to pay the full amounts so they can have an opportunity to start new lives. Help them clear their names from the credit bureau’s blacklist,” he said.
“No government funding will be required to achieve this if private companies are allowed to buy their debts.”
Finance Minister Pichai Chunhavajira said on Tuesday that debt restructuring is one way to make it easier for debtors to repay what they owe through smaller monthly sums, lower interest rates, or a reduction in how much the debtor owes.
He said another solution is the “good bank-bad bank” model, similar to the approach used to address many bad loans as a result of the 1997 financial crisis. A “bad bank” is created by a troubled bank to separate non-performing loans and bad assets from good debt.
“It is similar to an asset management company. But this time, banks, which are the creditors, must be asked to cooperate.” Mr Pichai said. “Some private companies may also be interested. The government will also consider how it can help.
“However, this is just an idea. We have to gather feedback from all involved,” he said, adding he would raise Thaksin’s idea with the Thai Bankers’ Association.
Thirachai Phuvanatnaranubala, a former finance minister, criticised Thaksin’s idea, saying it does not tackle the root cause of the problem. “The debts are just moved from one place to another,” he said in a post on Facebook.
Household debt totalled 16.3 trillion baht or 89.6% of gross domestic product at the end of last year, according to data from Kasikorn Research Centre.
If private firms were allowed to buy the debts, each must have about 500 billion baht, and it would take at least 32 companies to purchase all the debts, noted Somchai Srisutthiyakorn, a former election commissioner.
