"Giving money directly to people is the most effective way. It will lead to more spending that will help industrial, agricultural and business sectors."

He said the package will be officially submitted to parliament on January 28.

Abhisit was named as Thailand's new prime minister in December after a court dissolved the party leading the previous government.

The government says the stimulus funds will be used to support social security, free education programmes, create jobs and provide low-interest loans to farmers.

Thailand's tourist trade has been hit hard by recent protests [GALLO/GETTY]
A package of economic measures implemented by the previous government will also be extended by another six months.

These include lower water and electricity charges, free rides on some of Bangkok's public buses and free third-class train rides nationwide.

Phaithoon Kaeothong, the labour minister, told the Associated Press that a portion of the funds will be doled out in a one-off allowance of $57 to several millions of low-income employees and government officials.

Only those who earn less than $400 a month will qualify.

Abhisit has previously said his government would retain populist policies including cheap credit and health care implemented under Thaksin Shinawatra, the exiled former prime minister, who has loomed over Thai politics even after being ousted by a military coup in 2006.

A cabinet statement also said the stimulus package will also be used to help promote the country's battered tourism industry – a vital pillar of the Thai economy and one on which millions of jobs depend.

The Bank of Thailand has estimated the country's economy stands to lose $8.3bn as a result of November's week-long blockade of Bangkok's two main airports by anti-government protesters.

It said the shutdown of the airports could see visitor arrivals fall by up to 3.4 million in the coming year.