National debt hits record high on increased public jobs

By Park Hyong-ki

The outstanding national debt reached nearly 1,700 trillion won ($1.5 trillion) in 2018 due to the increased costs in paying the growing number of civil servants and soldiers, according to the Ministry of Economy and Finance, Tuesday.

The total debt, which includes future payments for state bonds and pensions, increased 8.2 percent from 1,555.8 trillion won in 2017.

More than half of the debt came from the government and regional offices' obligations to pay their workers and finance their pensions, which amounted to 939.9 trillion won.

This was up from 845.8 trillion won in 2017.

The rest consisted of short-term obligations to repay investors who purchased state and regional bonds, and those who subscribed to state savings programs for housing acquisition and liquidation.

This portion totaled 742.8 trillion won last year, up from 710 trillion won in 2017.

With state assets worth 2,123.7 trillion won in 2018, the country's net worth came to 441 trillion won, down 65.7 trillion won, or 13 percent, from the year before.

The Cabinet endorsed the state accounts, which were reviewed by the finance ministry with the ruling Democratic Party of Korea. The government, by law, will have to submit its books to the Board of Audit and Inspection, and then to the National Assembly by next month.

The rapid rise in the national debt is expected to put the brakes on President Moon Jae-in's labor policy and the administration's aim for a larger budget next year, analysts say.

President Moon has pledged to push state-run enterprises, government agencies and regional offices to hire as many as 180,000 people within his term, which ends in 2022. During his election campaign, he unveiled this job policy, which was part of his income-led growth policy, following the failure of the trickle-down economics of the previous government.

The administration has sought to carry out its promise especially after continuous poor employment data since July last year when the country only created 5,000 jobs.

Also, the government's budget for 2020 is expected to exceed 500 trillion won for the first time, with a large portion of it to be spent on job creation.

“As has been said before, the administration needs to readjust its policies, enabling the private sector to lead in creating jobs. Otherwise, the tax burden to finance the growing public workforce will increase,” said Yun Chang-hyun, an economist at the University of Seoul.

The finance ministry said the debt increase was due to a “low interest rate,” which has decreased the discount rate. This, in turn, has increased the value of future obligations.

“Also, the extended working age has increased the debt, along with a rise in bond issuances,” said a ministry official.