Declining interest rates are set to reduce the pressure on government interest payments relative to state revenue. Rating agencies recommend keeping this ratio below 12% of annual revenue to avoid excessive borrowing costs.
Current Debt Servicing Levels
Exceeding this threshold limits funds for investments and may force additional borrowing to cover fiscal deficits. The Thai Overnight Repurchase Rate, plus spread, currently stands at 1.1-1.2%. Government interest payments currently account for about 10.2% of revenue.
Emergency Borrowing Initiative
Under a 400-billion-baht emergency loan decree, the initial phase caps borrowing at 220 billion baht. This includes 20 billion baht loaned to the Oil Fuel Fund for energy subsidies and 200 billion baht for economic relief measures and investments shifting from fossil fuels to renewables.
Borrowing proceeds gradually, starting with 3-5 year loans before converting to long-term bonds maturing in 15-30 years. This strategy maintains public debt at approximately 68% for the current fiscal year and 69% for fiscal 2027, staying under the 70% ceiling.
The remaining 200 billion baht will be borrowed in fiscal 2027. Across the full debt portfolio, the average interest cost remains at 2.66%.
Legal Framework and Challenges
The government invokes Section 172 of the constitution to authorize this borrowing package, targeting economic relief and the transition to renewable energy. This section allows the King to issue emergency decrees for national or economic security when urgent necessity arises, as determined by the cabinet.
However, House representatives have invoked Section 173 to petition the Constitutional Court, contending the decree fails to meet the required criteria for economic security necessity.
