Thailand Can Ease Household Debt Burden by Using Coordinated Approach

IMF News, April 9, 2025

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Thailand’s household debt remains historically high at 89 percent of economic output.
Elevated household debt contributed to delaying Thailand’s post-pandemic recovery relative to other economies in the region.
Borrowing surged during the health crisis as people struggled to meet basic needs; lingering repayment burdens continue to constrain consumer spending, investment, and the economy more broadly.
Durably reducing household debt requires combining steps to lower the stock of existing obligations with policies to prevent the buildup of new borrowing.

Brazil:
- Program ran between July 2023 and May 2024.
- Helped more than15 million people renegotiate loans worth 52 billion reais, or about 0.5 percent of gross domestic product.
- Approach: renegotiate at a discount, settle debts, provide renewed access to credit with private lenders and minimal government spending.
Malaysia:
- After the 2008 global financial crisis, introduced responsible lending guidelines, risk-informed loan pricing, and stricter credit card requirements to address personal loans and credit card debt involving non-bank financial institutions.
Korea:
- Took over a failing credit card company and provided several ways for borrowers to resolve debts.
- Result: reduced the credit card delinquency ratio by three-quarters over four years through 2006.
Ireland and the United States:
- Used relatively simple and fast debt settlement and bankruptcy options to help struggling borrowers.
Emerging economies (examples given):
- Croatia and the Czech Republic used debt relief and forgiveness to help the most vulnerable debtors.

Government and authorities’ actions:
- Khun Soo, Rao Chuay (You Fight, We Help) program introduced in December 2024:
- Provides individuals and small businesses with lower monthly payments, interest suspension and forgiveness, and loan restructuring.
- Bank of Thailand guidelines set in January 2024 to ensure responsible lending:
- Strengthened consumer protection.
- Helped restructure more than 7 million accounts.
- Other measures: limits on borrowing relative to assets.
- Financial education: government working with schools to require financial education.
- Suggested actions for financial institutions: provide better information to borrowers and offer debt help programs.
Additional policy priorities identified:
- Make it easier for borrowers in default to regain access to formal bank loans.
- Create socially acceptable bankruptcy systems that are simple, effective, and fair.
- Prioritize the most vulnerable households and collaborate with private companies to reduce the cost of tackling persistent and non-viable debts.

Combine debt-reduction measures that lower the stock of obligations with policies preventing excessive new borrowing.
Target assistance to the most vulnerable households while coordinating with private lenders to limit fiscal costs.
Improve financial literacy and limit aggressive credit card marketing to prevent excessive borrowing.
Ensure policies are balanced to safeguard economic stability:
- Acting too quickly, without attention to economic interconnections, can hurt the banking sector, reduce credit availability, and slow consumer spending and business investment.

More than half of workers aren’t formally employed, reducing job security and social protection.
High informality makes households particularly vulnerable to shocks, increasing reliance on borrowing to meet basic needs.
Strengthening social protection would help reduce inequality and curb household debt, especially informal loans, thereby mitigating financial stability risks.

By Corinne Deléchat, Seunghwan Kim, Ying Xu; April 9, 2025