This year Thailand had suffered its biggest contraction in 22 years in the second quarter as the pandemic had battered tourism and the export sector, said Lavaron Sangsnit, the director-general of the ministry's Fiscal Policy Office.

The fund will be used to finance various economic stimulus programs, budget deficit, infrastructure investments and bailout of pandemic-hit state enterprises, according to the Thai Government House statement.

It also said the public debt-to-GDP ratio will widen to 57.23 percent in 2020-21, near the legal limit of 60 percent.

The statement said the government and the Bank of Thailand had jointly unveiled a THAB1.9-trillion stimulus early this year to cushion the blow from the pandemic but has so far spent only about a third of the amount.

Of the total, THAB387.4 billion will be used to repay existing debt under management, which totals THAB1.28 trillion.

The cabinet had also approved THAB291 billion in investment by 44 non-listed state enterprises in next fiscal year starting from Oct. 1.

Meanwhile the Thai government is set to target a disbursement rate of 95 percent of the budget to finance key projects including the industrial estate in the Eastern Economic Corridor and the mass transit project in Phuket.

The total investment of state enterprises, including eight publicly listed firms, will increase to THAB432 billion, all aimed to reboot the Thai economy, the statement said.

Thailand's Ministry of Finance said on Tuesday that the Thai economy is likely to shrink less than 8.5 percent projected earlier this year, as helped by the government's stimulus measures to revive the economy hit hard by the COVID-19 outbreak.