The International Monetary Fund (IMF) is calling on Thailand to bolster household financial security in order to address the nation’s persistently high household debt levels.
In its Country Focus report released on April 9, the IMF noted that more than half of Thai workers are employed informally, resulting in a lack of job security and social protection. This precarious situation leaves households susceptible to economic shocks and income fluctuations, often forcing them to take out loans to meet basic living expenses.
“Enhancing social protection is crucial not only for reducing inequality but also for decreasing household debt, particularly from informal lenders, thereby mitigating risks to financial stability,” the IMF stated.
Although Thailand’s household debt-to-GDP ratio has decreased to 89% from its pandemic peak, it still remains at historically high levels. The IMF emphasizes the importance of addressing household debt but cautions that measures must be carefully implemented to avoid harming economic growth. Rushed debt solutions that do not account for broader economic impacts may strain the banking sector, limit credit availability, and slow consumer spending and business investment, the lender warned.
The IMF recommends that policies aimed at reducing household debt should find a balance between easing financial burdens and maintaining economic stability.
The organization acknowledged that Thai authorities have already taken significant actions to alleviate household debt, including repayment assistance, debt restructuring programs, enhanced regulatory measures, and financial education initiatives.
Among these efforts is the “You Fight, We Help” debt relief program, which began in December 2024, allowing financial institutions to offer lower monthly payments, interest suspensions or waivers, and flexible loan restructuring for individuals and small businesses.
In January 2024, the Bank of Thailand implemented new guidelines to encourage responsible lending, which improved consumer protection and facilitated restructuring for over 7 million accounts. Additional measures aimed at capping borrowing based on individual asset levels are intended to further mitigate debt and enhance manageability.
The IMF’s country case studies highlight the significance of addressing persistent and unmanageable debt. In Thailand, borrowers who default often encounter significant hurdles when attempting to regain access to formal banking services.
To remedy this issue, the IMF recommends simplifying the process for resolving personal debt and establishing fair and efficient bankruptcy systems that are accessible to all.
The IMF also calls on the Thai government to prioritize support for the most vulnerable households and collaborate with the private sector to lower the costs associated with managing household debt.
A case study from Brazil was noted, where the government assisted defaulted borrowers by allowing them to renegotiate their debts at reduced amounts, thus restoring access to credit with the help of private lenders and minimal government expenditure. This program, which ran from July 2023 to May 2024, successfully aided over 15 million individuals in restructuring loans totaling 52 billion reals, roughly equivalent to 0.5% of Brazil’s GDP.
