By Kang Seung-woo
The interest payment on national debts will amount to about 23 trillion won ($20.24 billion) next year due to the government’s growing borrowing to cope with the global financial crisis, the finance ministry said Monday.
Korea is expected to pay 22.9 trillion won in interest next year, up about 15 percent from this year’s estimation of 20 trillion won, according to the Ministry of Strategy and Finance andthe Special Committee on Budgets and Accounts at the National Assembly.
The annual interest payments have been on an upswing, doubling over the past five years.
The government paid 7 trillion won in interest in 2003 and the amount surpassed the 10 trillion won mark for the first time in 2006 at 11.4 trillion won, followed by 13 trillion won in 2007, 13.4 trillion won in 2008 and 14.4 trillion won in 2009.
The ministry said that the ratio of interest payments to the government’s total annual expenditure will also climb to 7.4 percent from 2010’s 6.8 percent, meaning more than 70 won is paid in interest per budget of 1,000 won.
The interest payments had accounted for around 5 percent since 2006 before displaying a sharp upturn.
The increase is attributed to a rise in government borrowing, which will rise to 436.8 trillion won next year from 400.4 trillion won this year.
National debt has increased sharply in recent years as the government implemented a range of stimulus measures mostly funded by issuing bonds in a bid to kick-start the economy in the face of the global downturn.
Interest expenses on government bonds stood at 19.6 trillion won this year and 22.8 trillion won will be paid for bond interests next year.
In fact, next year’s interest from the bonds is expected to double from 11.1 trillion won in 2006 to 22.8 trillion won.
The national debt remained at 282.7 trillion in 2006, 299.2 trillion won in 2007 and 309 trillion won in 2008, but since the financial crisis in late 2008, it has steeply increased, reaching 359.6 trillion won in 2009 and being forecast to reach 468.1 trillion won in 2012. According to last year’s data, divided by the nation’s estimated population of 48.74 million, the per capita national debt will reach approximately 7.4 million won — an increase of 1.04 million won over the year.
Korea’s national debt represented 33.8 percent of its gross domestic product (GDP) in 2009, which is much lower than the OECD average of 90 percent.