Agricultural Subsidy Policies and the Challenges to Fiscal Sustainability: Structural Impacts and Long-Term Fiscal Commitments

Abstract

This article aims to analyze the structural impacts and fiscal sustainability challenges arising from Thailand’s long-standing agricultural subsidy policies. The analysis integrates frameworks from public finance, intertemporal budget constraints, and political economy to assess the systemic effects of sustained subsidy measures. The findings indicate that when subsidies lack clear time limits, efficiency-based conditions, and adequate data support, they tend to distort price signals, encourage surplus production, and delay the reallocation of labor and capital toward higher-productivity sectors. These dynamics contribute to rising income inequality, while fiscal burdens and contingent liabilities accumulate over time, undermining fiscal credibility and constraining future public investment capacity. The policy recommendations emphasize a strategic shift from short-term income support toward structural investment, including water and post-harvest infrastructure, quality and standards upgrading for agricultural products, the development of data systems and markets, and the promotion of agricultural technology and innovation. Such measures should be complemented by targeted assistance based on integrated digital databases. In addition, the article proposes the establishment of expenditure ceilings, explicit timeframes with automatic sunset mechanisms, the development of risk-management instruments decoupled from production volumes, and strengthened fiscal discipline and transparency regarding contingent liabilities. These reforms are essential to reducing economic distortions from agricultural subsidies while preserving long-term fiscal stability.