National debt hits record high in 2021 amid pandemic
South Korea’s national debt hit a record high last year as the government increased debt sales to finance expansionary fiscal spending to weather the crisis caused by the COVID-19 pandemic, it said. Tuesday the Ministry of Finance.
Sovereign debt, which covers bond sales and financial borrowing by central and provincial governments, stood at 967.2 trillion won ($796 billion) last year, up sharply from 120.6 trillion won. won from a year earlier, according to a 2021 national settlement report.
Debt growth in 2021 has slowed compared to 2020, when the national debt grew by the highest amount on record of 123.7 trillion won.
The settlement report, approved by the Council of Ministers, will be submitted to the National Assembly by the end of May after review by the state audit agency.
The government has implemented expansionary fiscal spending to deal with the economic fallout from the pandemic.
Last year, the country established a national budget of 558 trillion won and created two rounds of supplementary budgets totaling nearly 50 trillion won to support businesses hit hard by the pandemic.
The Ministry of Finance issued a record 180.5 trillion won in treasury bills last year, up 6 trillion won from a year earlier.
With record national debt, the debt-to-GDP ratio stood at 47% last year, down from 43.8% in 2020.
Despite massive budget spending, the budget deficit narrowed year-on-year as tax revenue rose on the back of the economic recovery and booming asset market, and the national pension service saw improved investment earnings .
Total government revenue stood at 570.5 trillion won last year, up 19.2 percent from a year earlier. Its total spending rose 9.3 percent year-on-year to 600.9 trillion won in 2021.
The consolidated fiscal balance, a key indicator of fiscal health, posted a deficit of 30.4 trillion won last year, down from a deficit of 71.2 trillion won a year earlier.
The managed fiscal balance, a measure of fiscal strength calculated after excluding the balance of social security funds, showed a deficit of 90.5 trillion won, down from a deficit of 112 trillion won in 2020.
After the national settlement, the country will have 3.3 trillion won of available funds that can be used for the possible creation of a supplementary budget.
Meanwhile, the country’s liabilities topped the 2 trillion won mark for the first time last year due to an increase in debt sales and accruals on state pension programs. .
Government liabilities – a total of bond sales, financial borrowings and unconfirmed liabilities related to future pension payments – hit a record high of 2,196.4 trillion won last year, up of 214.7 trillion won over the previous year, according to the report.
The country’s state assets hit 2.839.9 trillion won last year, up from 352.8 trillion won a year earlier.
Net assets, a spread between assets and liabilities, reached 643.5 trillion won, up 138.1 trillion won or 27.3 percent from a year earlier. This is the fastest annual growth since 2011.
South Korea’s national debt has been rising at a rapid pace in recent years, raising concerns about its fiscal strength.
The government has said it plans to normalize COVID-19-related emergency spending to pre-pandemic levels next year and cut non-priority spending in a bid to improve fiscal health.
The national debt is expected to reach 1.075.7 trillion won this year, marking the first time the debt has exceeded the 1 trillion won mark, according to an estimate by the Ministry of Finance.
The debt-to-GDP ratio is expected to reach a record high of 50.1% this year and the budget deficit is expected to reach 70.8 trillion won, or 3.3% of GDP.
South Korea faces growing fiscal pressures as social welfare costs are likely to rise amid rapid aging. (Yonhap)