By Orathai Sriring and Kitiphong Thaichareon
BANGKOK (Reuters) -Thailand has received a green light to borrow to finance its controversial 500 billion baht ($14.29 billion) digital handout scheme, a senior official said on Monday, in a boost to a government eager to stimulate a sluggish economy.
The Office of the Council of State, an independent panel that provides legal guidance to governments, had found no reason that would prohibit the government from borrowing to fund the plan, deputy finance minister Julapun Amornvivat told reporters.
The programme to give away 10,000 baht (around $285) to 50 million Thais to spend in their local communities was the signature election policy of the ruling Pheu Thai party.
The announcement came as Prime Minister Srettha Thavisin, who is also finance minister, urged the central bank on Monday to consider cutting interest rates to help the economy with inflation at very low rates.
The government wants to spur growth in Southeast Asia's second biggest economy, largely though stimulus and consumer spending, with Thailand trailing regional peers with growth forecast at about 2.4% last year, short of the 2022 figure.
The "digital wallet" plan has come under fire from economists and some former central bank governors who say it could be fiscally irresponsible and fuel inflation.
The government last year sought the Office of the Council of State's advice on the legality of a borrowing bill for the programme.
The office said borrowing for the digital wallet programme "can be done" under the power of the cabinet and the digital wallet committee, Julapun said.
However, it said the programme should only be launched in an economic crisis, and the government must seek wider opinions, he said.
The government has insisted it would be managed carefully and would boost the economy, which Julapun said was in crisis. The government would cascade its borrowing to fund the handout, he said, adding the government would stick to its plan to roll out the scheme in May.
The borrowing would be staggered and would not affect market liquidity, which remains ample, Julapun said.
He also said the central bank's rate increases were "a bit too fast, too aggressive", affecting the economy.
Premier Srettha said on Monday he would speak to the central bank governor to urge him to reconsider the bank's policy stance as inflation was very low.
"On raising interest rates, I have a clear stance that I don't agree with," Srettha said, adding "there might be a need to consider reducing interest rates", he said.
The central bank left its policy rate unchanged at a decade high of 2.50% in November after raising it by 200 basis points since August 2022 to curb inflation. It will next review policy on Feb. 7.
Headline inflation came in at -0.83% in December, making it the eighth straight month that it was outside the central bank's target of 1% to 3%.
($1 = 35.0500 baht)