IMF Staff Country Reports

This Selected Issues paper explores the scope of recalibration to deal with Thailand’s debt. Thailand’s debt ceiling plays a central role in safeguarding fiscal prudence. Fiscal framework provides necessary flexibility to respond to shocks, but at the cost of weakened expenditure control. This paper assesses Thailand’s debt ceiling and discusses policy implications. The analysis suggests that Thailand’s debt limit ranges between 80-110 percent of gross domestic product (GDP). The analysis shows that growth-maximizing debt levels for Thailand would range between 31 to 77 percent of GDP. Overall, the analyses indicate that the debt limit for Thailand would depend importantly on outcomes for growth, interest rate and capacity for fiscal adjustment. The results show that Thailand’s current debt ceiling is broadly consistent with the debt limit and the safety margin. However, a larger safety margin is required if contingent liabilities and additional spending needs are considered. Increasing frequency of shocks and the need for potentially larger counter-cyclical fiscal policies would further reduce the required debt ceiling.