National Debt Hits New Record

  • By Yoon Ju-heon, Hong Jun-ki

    January 09, 2020 13:50

    Korea's national debt has snowballed to over W700 trillion for the first time ever (US$1=W1,178).

    In the first 11 months of last year, the fiscal budget suffered the biggest deficit since relevant data were first compiled in 2011. The government's coffers are running dry because fiscal spending is rising as tax revenues decline. That raises the prospect of a fresh bonds issue.

    According to the Ministry of Economy and Finance on Wednesday, Korea's sovereign debt stood at W704.5 trillion in late November, up W6 trillion from the previous month and W53 trillion on-year. That boils down to W14.1 million worth of debt per Korean. The per-capita debt load rose from W2.37 million in 2000 to over W10 million in 2014.

    Korea's debt rises every year, but this is the sharpest increase on record. During the Lee Myung-bak administration (2008-2012), the national debt increased from W297.9 trillion to W425.1 trillion, an average of W25.4 trillion a year. During the Park Geun-hye administration (2013-2016), it grew an average of W31.9 trillion a year. But it surged W35 trillion in 2017, the first year of the Moon Jae-in administration, to surpass W600 trillion and another W52.7 trillion until November last year.

    But the consolidated fiscal balance, which subtracts gross expenditures from gross income, ran into a W7.9 trillion deficit in the first 11 months of last year, the highest deficit since 2009, in the aftermath of the global financial crisis.

    Han Jae-yong at the ministry said, "Tax revenues will rise, but so will fiscal expenditures, which raises the possibility of further worsening of the fiscal balance."

    Tax revenues totaled W276.6 trillion in the first 11 months of last year, down W3.3 trillion from the same period of 2018. The government's gross income increased W2.7 trillion over the same period to W435 trillion.

    Despite that, the government has already announced major spending plans. "We have set a target of frontloading a record 62 percent of our fiscal budget in the first half of this year, while 37 percent of the budget for job creation will be spent during the first quarter," Finance Minister Hong Nam-ki said Wednesday.

    Kim Won-shik at Konkuk University said, "The government plans to issue W60 trillion worth of sovereign bonds this year, and there's not much chance of tax revenues rising sharply due to the slow economy. That raises serious concerns of fiscal health getting even worse."

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