The Thai government is preparing to implement a significant debt relief initiative aimed at approximately three million debtors, alongside a budget allocation of THB 10 billion to assist in resolving non-performing loans (NPLs). This move is set against a backdrop of persistent economic challenges, despite a decrease in the debt-to-GDP ratio. Total household debt remains a considerable barrier to economic growth, with the government acknowledging the necessity to address ongoing debt issues across various sectors.

Over the past two years, the government has undertaken numerous strategies to tackle the debt crisis, including the establishment of programs focused on informal debt resolution, loan restructuring, and the offering of low-interest loans. Former Prime Minister Thaksin Shinawatra previously suggested the government purchase small debts from individuals, allowing those with poor credit histories to be removed from credit bureaus and regain access to financial services.

In late 2024, the government launched the 'Khun Suu Rao Chuay' (You Fight, We Help) program in collaboration with the private sector. This initiative was designed to support debtors facing NPLs on various fronts such as home and car loans, as well as debts from non-bank financial service providers. The program targeted 2.1 million accounts belonging to around 1.9 million debtors, collectively amounting to approximately 890 billion baht in outstanding debt.

Despite its ambitious goals, the program achieved only 50% of its target with around 820,000 applicants. In response, the government has extended the registration deadline to June 30, 2025, now focusing specifically on loans under 100,000 baht, which constitute 35% of the country's total bad debts, amounting to about 1.2 trillion baht.

Deputy Finance Minister Paopoom Rojanasakul confirmed that the Ministry of Finance and the Bank of Thailand (BOT) are currently revising the 'Khun Suu Rao Chuay' program, with new proposals to present to the Cabinet in June. Key modifications include:

1. Expanded Eligibility for the 'Direct Payment, Preserve Assets' Measure: The revised criteria will enable debtors with as little as one day of arrears, who have previously restructured their debts, to qualify for assistance. This measure will cover home loans up to 5 million baht, car loans up to 800,000 baht, motorcycle loans up to 50,000 baht, and SME loans up to 5 million baht. Under this plan, repayments will be reduced to 50% in the first year, 70% in the second year, and 90% in the third year, with interest suspended for a period of three years.

2. Increased Debt Ceiling for the 'Pay, Close, Settle' Measure: The new provisions will allow debtors to settle their NPLs by paying only 10% of the outstanding debt to close accounts immediately. The ceiling for this measure will increase from 5,000 baht to 10,000 baht for unsecured debts and 30,000 baht for secured debts. This extension is also aimed at fostering greater access to the program.

Additionally, sources from the Prime Minister's Office indicate a forthcoming initiative to offer a debt haircut worth 10 billion baht designed to assist approximately three million debtors whose collective debts total around 120 billion baht. This relief will primarily target individuals with long-standing, low-value debts and farmers indebted to the Bank for Agriculture and Agricultural Cooperatives (BAAC), particularly those above 70 years old.

The government expressed concerns about the long-term impact of these debts on credit histories, aiming to prevent further financial marginalization of affected individuals.

Financial institutions have reportedly set aside provisions for these bad debts, acknowledging that many of the affected debtors have had outstanding balances for over a decade. While the government decided against directly purchasing these bad debts due to the scale of the debtor population, the aim remains to alleviate burdens on the financial system and stimulate economic activity through targeted community support measures.

The loans targeted for restructuring or forgiveness will predominantly focus on those with longstanding relationships with financial institutions, such as elderly farmers facing precarious financial conditions due to fluctuating agricultural markets. This initiative seeks to provide them with a clean financial slate amidst renewed economic pressures.

Deputy Prime Minister and Finance Minister Pichai Chunhavajira emphasized the importance of engaging the Bank of Thailand and commercial banks in discussions around enhancing financial support mechanisms as the government maneuvers through economic uncertainties.

Moreover, expanding access to liquidity loans and addressing structural challenges in the agricultural sector are crucial components of the government's strategy to stabilize the economy and reduce household debt levels. Pichai underscored the need to increase prices for agricultural products through revised supply and demand strategies, aiming to bolster farmer incomes significantly.

In a related development, the Government Savings Bank (GSB) is contemplating a debt relief initiative targeting around 500,000 debtors among the 3.5 million with low NPLs. This program aims to address debts arising during the Covid-19 pandemic, with the GSB prepared to present its proposals for financial support to the Cabinet soon.

As Thailand navigates the complexities of its economic landscape, various stakeholders continue to explore avenues to alleviate financial burdens and stimulate recovery in key sectors.