By Park Si-soo
Staff reporter
A municipal city on the outskirts of Seoul declared a debt moratorium Monday on some 520 billion won ($432 million) it borrowed from the central government to build a new residential complex.This is the first time in the country’s history that a local government has declared a moratorium on its debts.
“We are supposed to pay back 520 billion won to the central government by the end of the month. But we cannot afford to it at the moment,” Seongnam City Mayor Lee Jae-myung said in a hastily-convened press conference. Instead, the mayor said the city plans to repay some 50 billion won each year by issuing bonds and through savings in its budget.
Some critics are doubtful over the unprecedented move, calling the declaration of the moratorium a “politically-motivated act.”
They claim the mayor, a member of the major opposition Democratic Party who took the job after defeating his predecessor from the ruling Grand National Party in the June 2 local elections, made the decision to deal a blow to the Lee Myung-bak administration.
Lee’s predecessor was accused of spending some 500 billion won to construct a luxurious city hall.
“Seongnam’s financial condition is quite healthy,” a close aide to the former major said. “The new mayor’s decision is a political show.”
The Ministry of Public Administration and Security doubted whether the moratorium was legally justifiable. “We have found no regulations allowing a local government to declare a moratorium,” said a ministry official.