Govt Promises Debt Relief, But How to Pay for It Remains Unclear
A January 27 event at Suan Dusit University, jointly organized by the Justice Ministry and 23 financial institutions, drew attention as attendees received guidance on settling their debts. The incident sits at the intersection of Thailand’s ongoing debate over how to manage household debt, the fate of non-performing loans (NPLs), and the political calculations surrounding promissory pledges from the ruling party and its allies. The discussion surrounding Thaksin Shinawatra’s recent “think aloud” proposal extends two earlier programs introduced under a prior Pheu Thai–led government aimed at alleviating the financial strain on small debtors and small and medium-sized enterprises (SMEs). The evolving policy dialogue raises practical questions about feasibility, funding, mechanics, and political incentives, all of which warrant careful, detailed examination.
Background: Nacional debt challenges and the two precedent programs
Thailand has long grappled with a heavy household debt load and a substantial stock of non-performing loans. The context for current policy proposals rests on two prominent programs implemented before Thaksin’s latest ideas took center stage. The first program addresses informal debt, a legacy of informal lending that has persisted under previous administrations. The program, introduced during the tenure of former prime minister Srettha Thavisin’s administration, employed a “carrot and stick” approach aimed at informal creditors. It drew participation from about 146,000 debtors who collectively carried roughly 10 billion baht in informal debt. The Interior Ministry reported that the scheme facilitated settlements for about 16,000 of these debtors, representing approximately 10% of the total in question. This track record demonstrates the government’s willingness to engage directly with informal creditors and debtors, but it also exposes the limits of such an approach when scaled to the broader debt landscape.
The second program, Khun Soo, Rao Chuai—translated as “You Fight, We Help”—was designed to assist smaller borrowers and SMEs by extending their repayment periods and offering a three-year window during which interest payments could be suspended for those who fulfilled their obligations. This initiative was implemented through a coalition of state and financial actors, including the Bank of Thailand (BoT), the Thai Bankers Association, the Finance Ministry, the National Economic and Social Development Council (NESDC), other financial institutions, and non-bank entities. Taken together, these early efforts reflect a pattern of attempts to ease debt burdens through restructuring, extended timelines, and targeted relief measures for smaller borrowers and informal debt clusters.
The juxtaposition of these two programs with Thaksin Shinawatra’s more radical proposal creates a sharp contrast in policy reach and risk. Thaksin’s idea pivots away from refinancing and targeted relief for specific debt categories toward a sweeping purchase-and-refinancing strategy for all household debt held by commercial banks. In this framework, the government would ostensibly step in to acquire the household debt from banks and then facilitate refinancing for debtors. The proposal diverges significantly from the incremental and targeted relief approaches of the two previous programs, aiming instead for a broad, systemic reorganization of who bears the risk of household debt.
There remains no clear, publicly verifiable answer as to whether the government would first buy the debt outright or have asset management companies in the private sector take on the debt purchase role. During a speech delivered in Phitsanulok as part of a local administration election campaign, Thaksin asserted that the government would not have to spend a single baht. He also asserted that debtors could be removed from the Credit Bureau’s records, a proposal described by supporters as a potential “heaven-sent” exemption for indebted households but viewed skeptically by critics who question its durability and practical implementation.
The ambiguity surrounding the feasibility and mechanics of the plan has prompted questions that demand direct answers from Thaksin and the Pheu Thai Party. In particular, analysts and observers want clarity on how the government could realize the debt purchase, who would fund such a purchase, and how the system would avoid unintended consequences, such as creating new incentives for riskier lending or transferring debt obligations to taxpayers without transparent fiscal backing.
Feasibility questions and the money problem
A central question is how the government could secure the funds to buy household debts from commercial banks. Thaksin claimed that he had “friends” in the business sector who might be willing to participate in refinancing operations. Yet the scale of the debt stock raises questions about the plausibility of private sector capital filling the gap, especially given the size of Thailand’s total household debt and the risk profile of NPLs.
Thailand’s total household debt, as recorded by the Office of the National Economic and Social Development Council (NESDC), stood at 16.3 trillion baht by the end of the third quarter of the previous year. This level equaled about 89% of GDP, underscoring the macroeconomic footprint of household indebtedness. Within this broader debt universe, the NPL component—comprising loans from housing, vehicle purchases, business loans, and personal loans—was estimated at 1.23 trillion baht. The question remains how to mobilize funds large enough to purchase such a volume of NPLs and how to price those assets in a way that is acceptable to both banks and taxpayers.
A critical constraint is the current landscape of asset management in the market. There are about 87 asset management firms that specialize in purchasing bad loans from banks to manage and profit from them. However, the total value of NPLs purchased by these asset managers is only about 300 billion baht, a fraction of the 1.23 trillion baht in NPLs outstanding across the system. This gap highlights a substantial supply-demand mismatch: if a government-led or private sector-led refinancing program required converting the entire 1.23 trillion baht of NPLs into refinanced debt, the existing market structure would face a major stress test. The private sector, as currently composed, does not appear to possess the capacity to swallow the entire tranche, and any public-sector program would require large-scale funding that may not be readily available in the budget or through conventional financing channels.
Another fundamental question concerns the nature of the money used in any debt-purchase operation. Some critics have speculated that the government might resort to issuing digital money or other forms of synthetic or non-traditional currency to facilitate the purchase of household debt from banks. The appeal of digital money, from a political and narrative standpoint, is obvious: it could be framed as a costless or low-cost instrument for debt relief. However, practical concerns arise about the credibility and stability of such a mechanism, its acceptability to the banking system, and its implications for monetary policy, financial stability, and fiscal responsibility. The absence of a clearly defined funding source or asset backing for digital money in this context raises serious concerns about its resilience and long-term viability.
The alternative, more straightforward path—government purchases of NPLs using conventional financing—faces its own hurdles. Finance Minister Pichai Chunhawaijira has publicly suggested that the government could buy NPLs worth up to the entire 1.23 trillion baht, effectively transferring the creditor status from commercial banks to the government. This would entail a large-scale balance-sheet transformation: the public sector would assume responsibility for private debt, and, in turn, taxpayers would bear the burden of repayment in some form, most likely through future taxes, government bonds, or other fiscal instruments. The practical implications include potential public debt expansion and the need for robust governance to prevent moral hazard and ensure that the resulting refinancing genuinely improves outcomes for debtors without propping up unhealthy lending practices.
The cost calculus would also hinge on the possibility of negotiating a “haircut” with banks. A haircut—reducing the face value of debt to reflect market values and risk—could be essential to lowering the fiscal burden. Analysts have suggested that if a haircut of around 50% could be negotiated, the total cost to taxpayers could be about 600 billion baht. This is a rough estimate based on the difference between the 1.23 trillion baht nominal value of NPLs and a more discounted transfer value.
Beyond the arithmetic, practical governance questions loom large. The government’s ability to mobilize funds—whether through a special budget, reallocation of existing resources, new debt issuance, or leveraging capital from state-linked entities—remains uncertain. There are also concerns about whether the current digital-wallet program and other social welfare mechanisms will be adequately funded to support broader policy objectives without crowding out other essential public services. Observers have noted that the digital wallet program’s third and fourth disbursement phases for different age cohorts were already facing implementation challenges, and questions linger about the government’s ability to sustain additional large-scale fiscal commitments.
In sum, the feasibility of Thaksin’s debt-purchase proposal hinges on three intertwined determinants: the availability of capital—whether from the private sector, the public purse, or a new digital-based instrument—, the willingness of banks to relinquish the NPLs at a favorable price, and the design of a refinancing mechanism that genuinely improves debtors’ circumstances without creating moral hazard or unsustainable fiscal exposure.
Practical mechanics, risks, and policy implications
If a debt-purchase and refinancing framework were to move forward, the mechanics would need to be carefully defined to avoid undermining financial stability and the banking sector’s risk-management incentives. The potential benefits of such a program could include a cleaner balance sheet for banks, relief from the burden of servicing a large portfolio of NPLs, and an expanded pathway for debtors to regain financial stability through more favorable refinancing terms. However, these benefits must be weighed against several risks and uncertainties.
First, the risk of moral hazard is central. If banks perceive that the government stands ready to buy distress debt at favorable terms, they may have little incentive to tighten underwriting standards and manage credit risk prudently in the future. This could lead to looser lending standards and higher future NPL formation, undermining long-term financial stability. A well-designed framework would need to include safeguards to prevent such distortions, such as performance-based conditions for refinancing, clear eligibility criteria for debtors, and transparent oversight mechanisms.
Second, the question of who bears the ultimate cost remains unresolved. If the government assumes private debt, the fiscal burden could be transferred to taxpayers, potentially affecting public services and fiscal credibility. A precise funding strategy would be essential, including how to price the NPLs, what kind of government support or guarantees would back the refinancing, and how to allocate risk across future budgets.
Third, the potential impact on credit flows and bank profitability warrants close scrutiny. Banks rely on NPL management as a core part of capital planning, risk assessment, and profitability. A mass buyout could temporarily improve banks’ balance sheets but might also alter their incentives for prudent credit risk management and pricing strategies. Regulators would need to monitor liquidity risk, capital adequacy, and systemic risk as the policy evolves.
Fourth, governance and transparency would play critical roles. The process would require clear legal authority, transparent criteria for debt eligibility, and robust disclosure to maintain public trust. The removal of debtors from Credit Bureau records, if implemented, would need to be carefully regulated to ensure it does not erase accurate credit histories, which could complicate future lending or borrowing for the same individuals.
Fifth, the macroeconomic context matters. The policy’s success would depend on broader macroeconomic conditions, including growth prospects, unemployment rates, inflation, and the health of domestic demand. If the policy inadvertently reduces household incentives to repay or to maintain prudent financial behavior, it could have longer-run consequences for savings rates and consumer confidence.
The political dimension cannot be ignored. Thaksin’s proposal sits within a broader political dynamic in which debt relief schemes can become focal points of electoral strategy. Supporters of Pheu Thai have highlighted the potential benefits of reducing household burden, while critics warn about the risk of promising unsustainable policy packages to secure votes. The durability and credibility of any such plan will depend on how it is framed, the clarity of its fiscal underpinnings, and the tangible, verifiable outcomes it delivers to debtors and the broader economy.
In terms of public messaging, the promise that the government could “buy the debt” without spending “real money” has drawn skepticism. The presentation of the plan as a no-cost or costless mechanism may appeal politically, but it demands a rigorous, transparent fiscal accounting to withstand scrutiny. The presence of ongoing national priorities—such as digital wallet disbursements and other social programs—adds another layer of complexity to trade-offs faced by policymakers. The government would need to articulate a coherent, financeable pathway that reconciles claims of affordability with the realities of fiscal constraints and long-term debt sustainability.
Overall, while the objective of easing financial pressure on households through refinancing is widely supported by many stakeholders, the current outline of Thaksin’s proposal leaves numerous practical questions unresolved. Without concrete details on funding sources, debt-purchase mechanics, credit bureau handling, and governance safeguards, the idea remains a high-level concept rather than an actionable policy blueprint. The ongoing scrutiny from opposition parties, financial sector participants, economists, and the public will shape whether this concept evolves into a credible policy alternative or remains a campaign-era talking point.
Financial landscape, timing, and policy sequencing
The Thai financial landscape already houses a complex array of instruments, institutions, and policy initiatives designed to manage household debt and bank balance sheets. The presence of 87 asset management companies that currently own and manage bad loans—collectively holding 300 billion baht of NPLs—illustrates both the existence of a private sector capacity to absorb distressed debt and the limitations of that capacity relative to the total NPL stock. If any large-scale refinancing or debt purchase program is to proceed, it would need to reconcile the gap between current private sector holdings and the total NPL volume. This gap underscores the potential dependence on public funding or an innovative funding construct to bridge the difference.
The timing of any policy rollout would be critical. With the digital wallet program in the pipeline and the third-and-fourth phases facing funding and implementation concerns, policymakers must consider how to sequence debt-relief measures with other fiscal and social programs. The government’s ability to finance debt relief without compromising other essential services is a central constraint. Any plan to purchase or refinance NPLs would need to be integrated into a broader fiscal framework that accounts for existing commitments, budgetary constraints, and projected revenue streams.
It is important to note that the debt-relief idea could have ripple effects in the broader economy. If households experience debt relief through refinancing, consumer confidence might improve, potentially boosting consumption and growth. Conversely, if the policy is perceived as fiscally reckless or politically opportunistic, it could erode investor confidence and increase the cost of capital for the country. The balance between short-term relief and long-term sustainability will be a decisive factor in determining whether such a policy could deliver net positive outcomes.
Within this context, the debate continues over whether the government should proceed with a direct purchase of NPLs, pursue broader refinancing through public channels, or rely on private-sector mechanisms with government guarantees or support. Each path carries a distinct risk profile, cost structure, and timeline. The path chosen will reflect not only economic calculations but also political calculations about electoral incentives, public trust, and the electorate’s appetite for ambitious debt-relief schemes that recast the relationship between banks, borrowers, and the state.
Political context and the broader promise landscape
The policy discussions around Thaksin Shinawatra’s debt-relief concept unfold within a charged political environment. Thaksin’s public comments have emerged in the context of his influence within Pheu Thai, and his rhetoric has routinely intersected with election-oriented messaging. The Phitsanulok campaign setting, where he stated that the government would not spend any money on the debt buyback idea, underscores how policy proposals can be framed to appeal to voters while simultaneously inviting scrutiny over feasibility and fiscal soundness.
This dynamic sits alongside ongoing debates about long-standing campaign promises from the Pheu Thai party and its coalition partners. For instance, prior election pledges included a minimum wage target of 600 baht by 2027, a 25,000 baht monthly salary for university graduates, and electricity price reductions. However, the tri-partite wage committee has yet to reach a consensus on a wage increase to 400 baht, and other promises have not materialized as promised. These elements contribute to public skepticism about the party’s capacity to deliver on ambitious economic and social reforms, and they influence how new debt-relief proposals are perceived.
The broader political implications of Thaksin’s proposal include potential electoral calculations. If the policy is framed as a direct, tangible benefit to indebted households, it could mobilize support among voters who stand to gain relief. Conversely, critics may view the plan as a political instrument designed to curry favor rather than a credible, fiscally responsible policy. The risk is that the policy becomes a symbol of political posturing rather than a deliverable program, which could undermine trust in the government and its ability to govern prudently.
Observers also note that Thaksin’s promise—to remove debtors from the Credit Bureau—could have significant implications for credit access and financial behavior. If debtors can permanently erase adverse credit records, lenders might recalibrate risk assessments, which could alter lending standards and credit availability in the future. The policy’s durability would thus depend on how such reforms are designed and implemented within the broader regulatory framework governing credit reporting and consumer finance.
In evaluating Thaksin’s latest proposals, it is essential to distinguish between aspirational rhetoric and executable policy. The core objective—relieving households of debt burdens through refinancing—aligns with broader social and economic aims. Yet the path to realization must withstand rigorous scrutiny of funding, governance, risk management, and fiscal sustainability. The coming months will reveal whether concrete policy design will accompany the campaign rhetoric or if the idea remains a political talking point that refrains from detailing the steps, costs, and safeguards necessary for real-world application.
Conclusion
The discourse around Thaksin Shinawatra’s debt-relief concept sits at a pivotal junction for Thailand’s policy-making, balancing ambitious debt relief with the practical realities of financing, liquidity, and fiscal responsibility. The plan’s departure from earlier targeted programs toward a broad debt-purchase-and-refinancing framework underscores a fundamental shift in approach to household debt and NPL management. The feasibility questions—about funding sources, debt-purchase mechanics, the role of asset management companies, and the treatment of Credit Bureau records—remain at the heart of the debate. The presence of large outstanding household debt, the size of the NPL stock, and the limited capacity of the private sector to absorb distressed assets highlight the significant challenges ahead, particularly if the plan is pursued without a transparent, financially sound design.
As policymakers weigh these questions, the country’s economic stakeholders—from banks and asset managers to borrowers and voters—will be watching closely. The balance between genuine relief for indebted households and prudent fiscal stewardship will determine whether the idea moves beyond political rhetoric toward a tangible, sustainable policy instrument. Until detailed, implementable plans emerge—and until financing structures, risk controls, and governance mechanisms are clarified—the proposal should be approached with cautious scrutiny rather than taken at face value as a straightforward solution to the country’s indebtedness, regardless of how compelling its rhetoric may seem.