Public-Sector Debt Accounts for over Half of GDP

Korea's public-sector debt surpassed W1 quadrillion last year for the first time ever as the government boosted welfare and other populist expenditures as well as support in the coronavirus pandemic (US$1=W1,303).

The Ministry of Economy and Finance said on Thursday, "Fiscal soundness has to be strengthened through measures like legally binding borrowing limits."

According to the ministry, public-sector debt including arrears by 342 state agencies jumped from W945.10 trillion in 2020 to W1.07 quadrillion in 2021. That is 1.5 times higher than before President Moon Jae-in took office in 2017. His administration increased welfare spending by 10.4 percent annually and also allocated huge budgets to support the pandemic-stricken public.

The Moon administration raised W137.20 trillion in supplementary budgets nine times over its five-year period in office, causing the debt ratio to GDP to soar to 51.5 percent. It rose for three years running from 42.1 percent in 2019 to levels seen in countries like Norway and Sweden.

Public-sector debt increased 11.5 percent to W1.43 quadrillion if arrears incurred by 158 state-run companies like KEPCO and Seoul Metro are included. That is up 1.9 times from 2011, when the figures were tallied for the first time.

Korea's sovereign debt, which includes only central and provincial government debt, jumped 14.7 percent last year to W970.70 trillion. The government expects it to surpass W1 quadrillion this year to W1.07 quadrillion.