The cabinet also agreed a separate 50 billion baht worth of insurance funding and a plan to establish a single command body for the national water management, said Deputy Prime Minister Kittirat Na Ranong.

There were no details on how exactly the government planned to raise funds for the flood budget.

"We will consider financing the budget by borrowing but have not decided on the borrowing pattern," Kittirat told reporters.

The cabinet also agreed to a proposal to transfer to the Bank of Thailand the Finance Ministry's 1.14 trillion baht debt burden incurred from its 1997 banking sector bailout, Kittirat added.

Tuesday's Bangkok Post newspaper quoted Virabongsa Ramangkura, chairman of the Strategic Formation Committee for Reconstruction and Future Development SCRF.L as saying the transfer of the debt to the central bank would provide more room for the government to borrow.

The newspaper also quoted a top water resources official as saying the government would allow the Finance Ministry to issue bonds worth 350 billion baht to use in long-term projects infrastructure projects.

So far, the government has put flood-related damages at 1.3 trillion baht from the historic floods, which came in late July and lasted until late November, killing more than 600 people and affecting about 2.4 million in a third of the country's provinces.

It had a devastating impact on industry, with seven big industrial estates shut down and tens of thousands of job losses at factories, mainly in the car and electronics sectors, which led to disruptions in global supply chains for automobiles and computer hard drives.

The central bank has said the flood could cut GDP growth by 2.1 percentage points and has slashed its economic growth forecast to 1.8 percent from 2.6 percent for this year. It had expected 2011 growth of 4.1 percent prior to the flood crisis.

The cabinet approved two weeks ago 20.1 billion baht in emergency spending for post-flood rebuilding, part of a previously pledged 130 billion baht for the recovery effort.

Prime Minister Yingluck Shinawatra said on Saturday the infrastructure and management plans should be finalised in January.

(Reporting by Pracha Hariraksapitak; Writing by Viparat Jantraprap; Editing by Martin Petty)

• A Permanent Economic Emergency