Stricter measures needed to ensure fiscal soundness
Korea's public sector debt is swelling at a rapid pace, sparking fears that our future generations might end up mired in a mountain of debt.
According to the Ministry of Economy and Finance, the public sector debt, which includes the debt of the general government and state-funded firms, hit a record high of 1,078 trillion won ($926 billion) at the end of 2018, up 33.4 trillion won from a year earlier. The proportion of public sector debt to gross domestic product (GDP), however, remained unchanged at 56.9 percent. After peaking at 61.3 percent in 2014, the figure continued to fall but took an upturn this year.
The national debt, which refers to sovereign debt in a narrower sense, is expanding 2 million won per second to reach 741 trillion won by the end of this year. The National Assembly Budget Office expects the national debt to more than double to 1,490 trillion won by 2028.
Debt can hardly matter if the state has enough debt servicing capabilities. The question is whether debt can be managed at proper levels. What's worrisome is that state-run firms like Korea Electric Power Corp. (KEPCO) are struggling with an upsurge of debt. Largely affected by the government's nuclear phase-out policy, KEPCO posted a net loss of 1.1 trillion won last year, a turnabout from the 1.5 trillion won net profit in 2017. The state-run power monopoly is also expected to suffer a net loss of more than 1 trillion won this year.
The finance ministry says Korea's fiscal health remains intact despite the soaring debt. But Korea, a small open economy, is vulnerable to external turmoil, raising the need to keep public sector debt at an affordable level. The government ought to be stricter in debt management in order not to pass down tons of debt to future generations.
Korea's public sector debt is swelling at a rapid pace, sparking fears that our future generations might end up mired in a mountain of debt.
According to the Ministry of Economy and Finance, the public sector debt, which includes the debt of the general government and state-funded firms, hit a record high of 1,078 trillion won ($926 billion) at the end of 2018, up 33.4 trillion won from a year earlier. The proportion of public sector debt to gross domestic product (GDP), however, remained unchanged at 56.9 percent. After peaking at 61.3 percent in 2014, the figure continued to fall but took an upturn this year.
The national debt, which refers to sovereign debt in a narrower sense, is expanding 2 million won per second to reach 741 trillion won by the end of this year. The National Assembly Budget Office expects the national debt to more than double to 1,490 trillion won by 2028.
Debt can hardly matter if the state has enough debt servicing capabilities. The question is whether debt can be managed at proper levels. What's worrisome is that state-run firms like Korea Electric Power Corp. (KEPCO) are struggling with an upsurge of debt. Largely affected by the government's nuclear phase-out policy, KEPCO posted a net loss of 1.1 trillion won last year, a turnabout from the 1.5 trillion won net profit in 2017. The state-run power monopoly is also expected to suffer a net loss of more than 1 trillion won this year.
The finance ministry says Korea's fiscal health remains intact despite the soaring debt. But Korea, a small open economy, is vulnerable to external turmoil, raising the need to keep public sector debt at an affordable level. The government ought to be stricter in debt management in order not to pass down tons of debt to future generations.
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