Thailand’s finances race towards a 2028 reckoning as fixed costs swallow revenue and debt nears 70%. People’s Party MP Anusorn Thamjai warns the ฿3.788 trillion budget demands major cuts as corruption drains up to ฿200 billion annually from Thailand.
Thailand faces a fiscal reckoning by 2028 as recurring costs swallow almost every baht raised through taxation. People’s Party MP Associate Professor Dr Anusorn Thamjai warns the ฿3.788 trillion budget exposes rising debt, weak revenue and shrinking investment. With public debt nearing its 70% ceiling, he demands deep spending cuts and action against ฿100–200 billion in annual corruption. Otherwise, Thailand risks a cash squeeze resembling a United States government shutdown, but without America’s reserve-currency protection.
Thailand faces a severe fiscal squeeze by 2028 unless the government cuts waste and restructures national spending. Recurring expenditure is now almost equal to annual tax revenue. As a result, little remains for investment, economic measures or emergencies. Rising debt interest is tightening the budget further.
Associate Professor Dr Anusorn Thamjai issued the warning after reviewing Thailand’s proposed ฿3.788 trillion budget for fiscal 2027. He is a People’s Party Member of Parliament. He also serves as Vice Chairman of the House Committee on Finance, Fiscal Affairs, Financial Institutions and Financial Markets. His position places him inside Parliament’s examination of government revenue, expenditure and borrowing.
Dr Anusorn spoke at Parliament on Wednesday, August 19. He said the review exposed an immediate need for deeper spending reductions. In particular, the government should remove unnecessary allocations and postpone non-urgent building projects. Those cuts, however, would address only part of the fiscal pressure.
Recurring costs close in on tax revenue as Thailand faces impossible spending choices before 2028
The central problem is the growing weight of recurring expenditure. Civil servant salaries, benefits, pensions and operating costs return every year. Meanwhile, interest payments increase as repeated deficits add to public debt. These commitments must be funded before ministers consider new policies.
Against this background, preparation of the 2028 budget could become extremely difficult. The existing fiscal framework restricts borrowing for recurring expenditure. At the same time, the largest budget items remain politically and legally difficult to reduce. Dr Anusorn said substantial changes would soon become unavoidable.
Without legal amendments, much deeper expenditure cuts could be required. Yet recurring costs include salaries and benefits for state employees. These commitments are extremely difficult and almost impossible to cut quickly. Political parties must also decide whether they will accept the electoral consequences.
Politically, that presents a formidable obstacle. Even necessary reductions could face resistance from parties, ministries and government agencies. In practice, agencies with strong bargaining power can protect their allocations. Less influential programmes could then carry heavier reductions.
Thailand’s State Fiscal and Financial Discipline Act creates another restriction. The law limits government borrowing for recurring expenditure. Notably, at least 20% of the annual budget must be allocated to investment. That requirement protects capital spending and supports established fiscal discipline.
Investment rule collides with fixed costs as Thailand’s shrinking fiscal room threatens 2028 budget
Even so, the rule becomes harder to meet when fixed expenditure consumes most revenue. Salaries, pensions, benefits and interest costs continue rising. By contrast, tax receipts remain weak compared with the economy’s size. Investment must therefore be protected while unavoidable commitments expand.
Looking ahead, Dr Anusorn expects that conflict to become serious during preparation of the 2028 budget. The government cannot borrow without restriction for routine expenses. Nor can it freely remove the legally required investment allocation. Accordingly, the available space between both requirements is steadily disappearing.
Parliament’s finance committee will examine the problem during an academic seminar on August 29. The event is entitled “Fiscal Reform for the Quality of Life of the People.” It will take place in seminar room B1-4 on Parliament’s B1 floor. Among other matters, the discussion will cover fiscal rules, expenditure reform and tightening budget conditions.
Thailand is not presently facing an immediate sovereign default. Nor has the government lost access to domestic financing. Nevertheless, the country’s fiscal room is narrowing rapidly. Weak revenue, low growth and rising fixed costs are driving that compression.
Government revenue remains unusually low for an upper-middle-income economy. Tax receipts represent approximately 16% of gross domestic product, depending on the measurement used. In comparison, the wider Asia-Pacific ratio is approximately 20%. Thailand therefore operates with a substantially narrower revenue base.
Low tax receipts leave Thailand with a narrow revenue base as fixed government costs rise
Moreover, the government collects comparatively little from several major tax sources. Personal income tax generates only around 1.9% of gross domestic product. Property taxes produce approximately 0.4%. Social security contributions also remain comparatively low.
Thailand’s value-added tax rate remains at 7%. The statutory rate, however, is 10%. In addition, numerous deductions, exemptions and preferential arrangements narrow the tax base. Economic activity consequently produces less public revenue than in many comparable countries.
Large informal and agricultural sectors present another problem. Both remain difficult for the government to tax effectively. Furthermore, many workers earn too little to enter the personal income tax system. Others operate outside formal employment and social security arrangements.
The Organisation for Economic Co-operation and Development has identified Thailand’s narrow tax base as a serious weakness. Low tax receipts limit the government’s ability to reduce persistent deficits. Equally important, they restrict funding for growing public expenditure needs. Those demands will increase as Thailand’s population ages.
On the growth side, Thailand’s performance has remained persistently weak. The International Monetary Fund forecasts expansion of only 1.6% during 2026. That follows several years of growth below many regional competitors. Consequently, the economy is producing insufficient additional revenue to relieve the fiscal pressure.
Weak growth squeezes tax income as public debt moves closer to Thailand’s statutory ceiling of 70%
Low growth directly restricts corporate profits, household income and consumer spending. Hence, corporate, personal income and consumption tax receipts remain strained. Weaker economic activity also affects imports and related collections. Simultaneously, the government faces continued demands for economic assistance.
During weak periods, political pressure grows for subsidies, welfare payments and stimulus measures. Each new programme requires additional funding. In turn, borrowing covers the difference between available revenue and total expenditure. Every deficit then increases future debt and interest costs.
Thailand’s public debt stood at approximately 63% of gross domestic product after fiscal 2024. It then increased to around 64.8% during fiscal 2025. Earlier projections placed the ratio above 67% by fiscal 2026’s end. Thus, debt is moving close to the statutory ceiling of 70%.
The government could amend that ceiling or relax other fiscal criteria. Dr Anusorn warned that such action would create a separate problem. Specifically, changing the rules could damage Thailand’s reputation for strict fiscal discipline. Investors could also question the government’s commitment to controlling debt.
Retaining the rules would force harder spending decisions. The government must either cut recurring commitments or remove lower-priority expenditure. Alternatively, it could reduce investment, although the 20% requirement restricts that option. Every available route therefore presents major financial or political difficulties.
฿788 billion deficit exposes pressure as fixed spending consumes almost three quarters of the budget
The proposed 2027 budget exposes the size of the imbalance. Planned expenditure totals ฿3.788 trillion. Against that, net revenue available for spending is projected at only ฿3 trillion. The government therefore expects to borrow approximately ฿788 billion.
That financing gap remains substantial despite previous efforts to restrain expenditure. Current expenditure accounts for approximately ฿2.786 trillion, or nearly 74% of the budget. Capital investment receives approximately ฿789 billion. Separately, ฿151.52 billion is allocated to principal debt repayments.
The capital allocation does not represent entirely flexible spending. Some projects require funding across several years. Others involve existing contracts or previously approved commitments. Crucially, the investment requirement places a legal floor beneath the allocation.
For that reason, the government cannot simply transfer investment funds towards salaries or routine operating costs. It also cannot ignore principal repayments and interest obligations. The remaining discretionary space is much smaller than the total budget suggests. Before 2028, that space could narrow again.
Personnel costs represent one of the largest recurring burdens. Thailand maintains an extensive civil service and a broad network of ministries, departments and agencies. The public payroll also covers military personnel, police officers and other state employees. Such costs cannot be quickly removed.
Ageing population and higher debt interest lock more government revenue into recurring expenditure
Beyond salaries, government workers receive employment benefits, pensions and healthcare support. Those obligations continue after retirement. Over time, today’s payroll decisions create commitments extending across future budgets. The eventual cost is therefore larger than each year’s salary allocation.
Thailand’s ageing population will intensify the pressure. Pension and healthcare expenditure will rise as the number of older citizens increases. Conversely, slower workforce growth could restrict tax and social security receipts. More income will then be committed before ministers examine new spending.
Interest payments create another increasingly fixed cost. Successive deficits require the government to issue additional bonds. Existing debt must also be refinanced when it matures. Depending on market conditions, replacement borrowing could carry higher rates.
In that event, interest expenditure would rise without any major new programme. More money would then move towards debt servicing. Meanwhile, investment, education and development programmes would compete for the balance. The squeeze would tighten with every additional deficit.
First, the government must fund salaries, pensions, benefits, welfare commitments and debt costs. Infrastructure and economic programmes receive what remains. On another front, transport, water management and workforce development face the same restriction. Emergency measures must also come from limited discretionary resources.
Budget squeeze limits state investment as Anusorn targets corruption costing up to ฿200 billion yearly
Thailand may retain enough money to operate the state. It could, however, have far less capacity to modernise infrastructure or lift investment. In parallel, reduced fiscal room limits the government’s response to economic shocks. Natural disasters could create additional and unexpected demands.
Dr Anusorn said the government had previously discussed reducing the public-sector workforce. Shrinking state employment would be politically difficult and administratively complex. Unlike project allocations, salaries and benefits cannot be removed rapidly. He therefore identified corruption and budget leakage as immediate savings targets.
Dr Anusorn estimated that reducing corruption could save between ฿100 billion and ฿200 billion annually. Such savings would materially relieve the fiscal pressure. More directly, they would avoid immediate salary reductions or cuts to essential services. Instead, they would prevent public money from leaking through corrupt projects.
He also identified significant loopholes within government procurement procedures. Large projects can be divided into smaller contracts. Each contract can then remain below a value of ฿500,000. Through this method, project subdivision may avoid stronger scrutiny and procurement controls.
Procurement loopholes identified as Anusorn demands principled cuts to wasteful government spending
Dr Anusorn said the practice required a thorough investigation. Budget leakage on that scale could no longer remain a secondary concern. Ultimately, Thailand’s fiscal position would force changes, he warned. Continued delays would leave the government with fewer choices.
“If you don’t reform or change, you can’t move forward,” Dr Anusorn said. “It’s a matter of who has bargaining power.” He then called for spending decisions based on fiscal principles rather than institutional influence.
“If we remove the issue of bargaining power and focus on principles, we’ll see which things can be cut first.” He identified overseas study trips as one immediate target. These allocations could be removed before salaries or essential services were considered.
“For example, overseas study trips can be cut immediately because the country is not in a position to spend money extravagantly.”
The remarks highlighted the bargaining behind annual budget allocations. Agencies with greater political influence can defend their funding requests. In contrast, weaker departments or programmes may face larger reductions. Budget cuts therefore do not always reflect each programme’s importance.
Under a principles-based review, essential services, legal commitments and productive investment would be identified first. Non-urgent buildings, overseas visits and unnecessary operating costs could face early reductions. Despite earlier cuts, Dr Anusorn said the savings achieved remained insufficient. Small adjustments would not match the approaching fiscal constraint.
Major fiscal reforms urged before 2028 as Thailand faces the danger of a United States-style shutdown
Instead, Thailand would require major budget reforms before the 2028 spending round. Procurement loopholes and annual leakage would also require attention. As part of this, spending reviews would need to move beyond minor reductions. Earlier limited exercises had failed to deliver enough savings.
Dr Anusorn also warned against conditions resembling United States government shutdowns. Such shutdowns follow conflicts over federal spending, borrowing and funding legislation. During those periods, non-essential federal agencies can temporarily close. Some government employees can also experience delayed salary payments.
In response, Dr Anusorn said Thailand must prevent its fiscal position from reaching that stage. He emphasised an important difference between the two countries. The United States issues the world’s principal reserve currency. Global investors consequently maintain heavy demand for dollar-denominated assets.
The United States can also issue bonds through the world’s deepest sovereign debt market. Its currency provides borrowing capacity unavailable to most countries. Additionally, international trade and financial reserves remain heavily dependent on the dollar. Thailand has no comparable protection.
Baht limits Thailand’s borrowing power as rising fixed costs steadily reduce national investment room
The baht is not a major international reserve currency. Thailand therefore cannot assume unlimited demand for additional government debt. Similarly, it cannot create money without wider financial consequences. Excessive borrowing could weaken confidence and increase future financing costs.
Thailand nevertheless retains several important protections. Most public debt is denominated in baht. It is also financed mainly through Thailand’s domestic financial system. Furthermore, the country holds substantial foreign reserves and limited direct foreign-currency sovereign exposure.
Given those protections, the immediate threat is not necessarily a sudden foreign-currency default. Instead, Thailand faces a prolonged loss of budget flexibility. The government may continue paying salaries, pensions and creditors. Progressively less money could remain for national development.
This pressure arrives while Thailand requires substantial investment to strengthen growth. Transport networks need continued funding. Likewise, water management, education and workforce development require long-term expenditure. Weak growth, however, suppresses the revenue needed for those projects.
Global debt pressure deepens as costly domestic borrowing diverts funds from productive investment
Additional borrowing can cover the shortfall temporarily. Over the longer term, it creates future interest costs. Those costs consume funds that could otherwise support productive investment. The fiscal squeeze then deepens Thailand’s existing growth weakness.
Internationally, Thailand’s position reflects a broader debt problem. Government debt across emerging and developing economies reached almost 70% of gross domestic product during 2024. That was the highest level in 55 years. Debt servicing costs also increased sharply.
Developing countries paid a record $415 billion in external interest during 2024. Between 2022 and 2024, debt payments exceeded new financing by $741 billion. Compounding the pressure, higher international rates have raised refinancing costs. Governments now face more expensive borrowing than before 2020.
Many countries have responded by borrowing more heavily from domestic markets. Banks, pension funds and insurance companies increasingly purchase government bonds. On the downside, heavy state borrowing can divert credit from private businesses. It can also restrict private investment.
Domestic public debt may carry shorter repayment periods. In such cases, governments face greater refinancing pressure when large volumes mature. A sudden increase in market rates can then raise debt costs sharply. Thailand’s domestic financing base reduces currency risk but does not remove refinancing pressure.
Thailand approaches hard fiscal choices as revenue barely covers recurring costs and debt nears its cap
Thailand is not presently among the world’s most vulnerable sovereign borrowers. Even so, low tax receipts and weak growth reduce its protection against future shocks. Public debt is already approaching the statutory ceiling. Recurring expenditure is also almost matching annual tax revenue.
The proposed 2027 budget leaves little room between revenue and fixed commitments. By 2028, Dr Anusorn expects the existing framework to become much harder to maintain. At that point, the government would face several difficult choices. Each would carry significant financial or political consequences.
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One option would involve cuts to politically protected recurring expenditure. Another would remove lower-priority programmes and non-urgent construction. A third would amend existing fiscal controls. Any relaxation, however, could weaken confidence in Thailand’s fiscal discipline.
For now, Dr Anusorn said the response must focus on leakage and unnecessary spending. He called for serious reductions rather than small savings. Overseas trips and non-urgent buildings could be cut first. Procurement practices involving subdivided contracts also require investigation.
Without deeper action, recurring expenditure could consume almost all annual tax revenue. At the same time, debt servicing would claim a growing share of future budgets. By 2028, Thailand could have little room for investment, emergency expenditure or economic support.
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