The views expressed in this presentation are the views of the author and do not necessarily reflect the

views or policies of the Asian

Development Bank Institute (ADBI), the Asian Development Bank (ADB), its Board of Directors, or the governments they represent.
ADBI does not guarantee the accuracy of the data included in this paper and accepts no responsibility for any consequences of their use.
Terminology used may not necessarily be consistent with ADB official terms.

Fiscal Rules and

Fiscal Responsibility Laws
in case of Thailand

Peerapat Wongchaiwat, Ph.D.

Fiscal Policy Office, Ministry of Finance
 Outline
 Fiscal Rules

 Fiscal Responsibility Act

B.E. 2561 (FRA)

 New Budget Procedure Act

B.E. 2561 (BPA)
 Public Debt in Thailand
Thailand holds a strong fiscal position, well below under the threshold
70

65 Public debt to
GDP threshold
60 ≤60%
55

50

45

40

35

30
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Public debt/GDP
3
 Fiscal Responsibility
Fiscal Rules inActThailand
B.E. 2561 (FRA)

The
Constitution

Fiscal Legal Budget

Responsibility Framework Procedure Act
Act

Public Debt
Management
Act

4
CONSTITUTION OF THE KINGDOM OF THAILAND (B.E. 2560 (2017))
Section 140. The payment of State funds shall be made only by the authority of
 law on appropriations
 law on budgetary procedure or the law on transfer of appropriations,
 the law on treasury reserves or the law on financial and fiscal discipline of the State
except that it may be advanced in the case of urgent necessity under the rules and procedure
prescribed by law. In such case, the expenditure estimates for reimbursement must be set aside in the
Transfer of Appropriations Act, the Supplementary Appropriations Act, or the Annual Appropriations Act
for the following fiscal year.

Section 141. The expenditure estimates of the State shall be made in the form of an Act.
If the Annual Appropriations Act for the following fiscal year is not enacted in time, the law on
annual appropriations for the preceding fiscal year shall apply for the time being.
The State shall allocate adequate budgets for the independent performance of
duties of the National Assembly, the Courts, the Independent Organs and the State Attorney Organ
in accordance with the rules prescribed by the law on financial and fiscal discipline of the State. In
the case where the National Assembly, the Court, the Independent Organ or the State Attorney
Organ is of the opinion that the allocated budgets may not be adequate for the performance of its
duties, it may directly submit a motion to the committee.
5
 FiscalResponsibility
Fiscal Responsibility Act
Act B.E.
B.E.2561
2561(FRA)
(FRA)

Rationale Expected Results

• Constitution: Section 62 • Fiscal discipline guideline for agencies
State must strictly keep fiscal discipline • Discipline on fiscal innovation
for fiscal stability and sustainability under • Comprehensive Fiscal Reports & Analytics
a fiscal responsibility law
• No specific legal framework for fiscal
responsibility in place
• Fiscal Innovation
• Lack of Comprehensive Fiscal Situations

6
 Fiscal Policy Committee
Chairman – Prime Minister
Deputy Chairman – Finance Minister

MOF BB NESDB BOT FPO

Committee Secretariat

Duties & Powers

 Lay down additional fiscal disciplines
 Prepare and revise Medium-Term Fiscal Framework (MTFF)
 Suggest directions for solving problems regarding budgeting, revenue collection, public debt management
and asset management
 Set numerical limits on the contingency fund/debt repayment/Multi-year commitment budget/additional
multi-year commitment budget committed during the fiscal year/debt management framework
 Set out a limit on the compensation rate for expenses or revenue loss from quasi-activities (Section 28)
 Lay down policies on, and supervise, financial risk management
 Set out reporting criteria for public debts and fiscal risks 7
 Medium-Term Fiscal Framework (MTFF)
(S.13)

Fiscal Policy Committee

MTFF must have
Council of Ministers
Council of Ministers approves  Duration no less than 3 years
MTFF within 3 months after
Approved
the end of FY  Serves as the principal master
MTFF Adoption plan for fiscal planning, budget
expenditure preparation, public
 Preparation of the Annual Budget debt management
Expenditure
 Agencies takes into consideration for their
Revenue Collection or generate earnings,
budget preparation and Debt financing
8
 Medium-Term
Medium-TermFiscal
FiscalFramework
Framework(MTFF)
(MTFF)
The main features of MTFF cover
01
• Fiscal framework which comprises

02 of fiscal objective and policy

measures
• Overview of current
macroeconomic condition and
forecast
03
• Fiscal position and forecast

04 including revenue, expenditure,

fiscal balance, and fiscal
management
• Public debt status and
analysis 05
• Fiscal Obligations
9
 Expenditure Rules Under FRA
Section 20: Annual Budget Rules
 Capital Expenditures must account for no less than 20% of the annual budget
and must not be less than the FY Budget Deficit;
 Appropriations for Public Sector Personnel and their associated welfare must be
sufficiently allocated;
 Appropriations for debt repayment must be sufficiently allocated for principal
repayment, interests and borrowing expenses;
 Any financial obligations required contribution / compensation from the budget
must be allocated within a certain period stipulated by law;
 Financial obligations arisen from quasi-activities must be allocated at the earliest
opportunity;
 Contingency Fund for emergency or necessity shall be budgeted only for the
purposes of preventing or remedying serious situations or with utmost urgency at
a proportion determined by the Fiscal Policy Committee.
10
 Expenditure Rules Under FRA
Section 20: Annual Budget Rules
 Capital Expenditures must account for no less than 20% of the annual budget
and must not be less than the FY Budget Deficit;
 Appropriations for Public Sector Personnel and their associated welfare must be
sufficiently allocated;
 Appropriations for debt repayment must be sufficiently allocated for principal
repayment, interests and borrowing expenses;
 Any financial obligations required contribution / compensation from the budget
must be allocated within a certain period stipulated by law;
 Financial obligations arisen from quasi-activities must be allocated at the earliest
opportunity;
 Contingency Fund for emergency or necessity shall be budgeted only for the
purposes of preventing or remedying serious situations or with utmost urgency at
a proportion determined by the Fiscal Policy Committee.
11
 Expenditure Rules Under FRA
Section 21: Supplementary Budget
 Rationale for Supplementary Budget must
be well-defined and at absolute necessity
to spend additional money during the
current FY and not the next
 Sources of funds for the supplementary
budget must be clearly specified
Section 22: Central Fund
Appropriations with respect to the Central
Fund shall be allocated only in the case
where budget expenditure items are not or
should not be allocated to individual
agencies.

Section 24: Transfer of Budget Appropriations

Transfer of budget appropriations between public agencies
are not permitted unless stipulated otherwise by law.

12
 The Ratio set byResponsibility
Fiscal the Fiscal Policy
Act Committee
*Ratio to Total Budget
2.0-3.5% 2.5-3.5% ≤10% ≤5% ≤30%

≤60% ≤35% ≤10% ≤5%

13
 Revenue Rules Under FRA
Section 25 and 35: Earmark Tax
The earmarking of government revenue for a
particular purpose of a certain public agency is
prohibited unless a specific legislation allowing
such earmarking is enacted.
Section 26: Surcharge Tax
The proposal of a legislation pertaining to the
collection of extra taxes and fees other than
those stipulated in the regulations (surcharge)
is not allowed unless it is raised as a part of
Local Admistration Organizations’ (LAOs)
revenue.

Section 36: SOEs remittance

State-owned enterprises which are not subjected to Corporate Income Tax shall apportion their net
profits and remit a specific sum to the government at the Corporate Income Tax Rate. The Ministry
of Finance reserves the right to demand the remittance at a higher rate than this.

14
 New Budget Procedure Act B.E. 2561 (BPA)

Section 6 of BPA: Prescribes that the planning, executing, controlling, monitoring, and
evaluating the budget shall be pursued in accordance with this Act and FRA

Rationale Expected Results

“to improve the overall budget  Comprehensiveness
management to be more result-
 Accountability
oriented, efficient, and effective”
 Efficiency
 Effectiveness

15
 BPA Key Features

Emphasis will be given on outcome achievements or benefits

derived from budget spending while spending coverage will
also consider other sources of funds

Ministers and head of agencies receiving the budget are

now required to oversee, monitor, and evaluate the spending
to improve spending accountability

Medium-Term Expenditure Framework (MTEF) will be

emphasized and prepared for at least three years ahead
(in line with MTFF under FRA)

16
 BPA Key Features

Local administrative organizations (LAOs) will become direct

budget recipients (7,851 LAOs)

Public Sector Personnel Program is separately classified while Transfer

of allotted budgets among agencies under the same integrated
program is now permitted

Agencies can no longer carry over their budget to the following fiscal year
unless an obligation has been committed by the end of the fiscal year

Budget monitoring and evaluation systems will be provided

for pre-allocation, ongoing, and post-spending reviews

17
 Public Debt Management
Public Debt Management Act B.E. 2548 (2005)

20% + 80% in case of budget Section 21. + 25/1.

Framework and deficit/develop the domestic debt
1. restriction for instrument market
raising loan
3% to manage the liquidity of Section 21/1.
treasury reserves

Framework and
2. restriction to 10% for economic and social
development/on-lending to agencies1
Section 22. + 25.
provide guarantee
(foreign currency)

20% for guarantee the repayment of Section 28. + 25.

debt of agencies2//on-lending
to
agencies1 (domestic currency)
1including a State agency, an agency under State supervision, a local administrative organization, a State financial institution
2including a State agency, a State enterprise or a State financial institution 18
 Challenges

Fiscal Responsibility Act

 Increased burden to agencies
 Some challenges to keep the fiscal rules

New Budget Procedure Act

 Efforts required to ensure understanding of parties involved and
preparation of supporting information systems;
 Expected volume of work as 7,851 local administrative
organizations becomes direct budget recipients;
 Full-scale monitoring and evaluation
 Collection of other sources of revenue from agencies
19
 THANK YOU
Fiscal Policy Office,
Ministry of Finance,
Thailand
wongchaiwat@hotmail.com