The Constitution Court yesterday cleared the way for the Pheu Thai-led government to go ahead with its multi-billion-baht post-flood spending plans that are designed to strengthen investors' confidence.
Nine judges voted unanimously that an executive decree allowing the government to borrow 350 billion baht to fund water management and flood rehabilitation projects was not against the charter."The decree is drafted to alleviate damages, especially those incurred by industrial estates where 841 factories are located. Without preventive measures, investors may seek to relocate production bases," read the verdict.
"The court has reached a unanimous verdict that the decree is of urgency and in line with Section 184 (1) and (2) of the constitution."Section 184 stipulates that an executive decree can be issued only for urgent matters.
The judges voted 7-2 to rule that another executive decree seeking the transfer of Financial Institutions Development Fund (FIDF) debts to the Bank of Thailand was also in compliance with the charter.
The court said the decree would enable the government to invest more because it would be freed of obligations to set aside money for principal and interest payments for the FIDF.
The amount of 68 billion baht set aside for payment of FIDF debts in the 2010 fiscal year accounted for 16.2% of the investment budget, according to the court.
"By transferring the debt to the Bank of Thailand, the government has done so for the economic stability of the country. The two decrees are complementary and related to ensure debt management and investors' confidence. It is not against the constitution and it is made necessary by the flood," read the court ruling.
The two decrees were among four executive decrees approved by the cabinet on Jan 10 as part of its flood management plans.Deputy Prime Minister and Finance Minister Kittiratt Na-Ranong said yesterday the government would obtain short-term loans from local financial institutions.
He said that when the government accumulates 10 billion baht, it would issue long-term bonds in compliance with project spending.
He said progress was being made on the proposed development of 17 related river basins costing about 40 billion baht.Areepong Bhoocha-oom, permanent secretary for finance, said yesterday the investment budget for the 2013 fiscal year is likely to be increased and would account for 17% of government expenditure.
Critics of the executive decrees yesterday accepted the court's rulings.
Democrat leader Abhisit Vejjajiva said the opposition was doing its job in asking for the court's ruling and it would keep on monitoring the government's disbursement of loans.
"We will scrutinise the government operations and see if the money is spent as planned," he said.
The two decrees will be submitted to parliament for endorsement and passage into bills. The process is likely to take about two weeks.
Democrat Korn Chatikavanij said the opposition accepted the court's rulings and considered the dispute settled."We will monitor the spending to see if it is of urgency. If the money can't be disbursed after years, it's not really urgent," he said.
Mr Korn called on the government to clarify what it would do to boost deposit protection for bank clients.
He was referring to the Finance Ministry's order that requires commercial banks to pay a premium of 0.47% on their deposits to the Deposit Protection Agency. Only 0.01% will be paid for deposit protection while 0.46% will be used to pay off the FIDF debt.
The Bank of Thailand said the use of premiums on banks' deposits to service the 1.14 trillion baht debt of the FIDF would not increase the burden on consumers or hurt its key objective of price stability.
Governor Prasarn Trairatvorakul said the central bank would spend 40-50 billion baht from income from the 0.47% levy to pay for the interest incurred on the FIDF's debts.
Dr Prasarn said the 0.47% rate was the best way to avoid banks passing on the financial burden to consumers.
He said the banking system's deposit base would grow in line with the economy, creating a greater chance to use the contribution to pay off the principal.