SEOUL, April 6 (Yonhap) — South Korea’s national debt grew by the largest-ever amount last year as the country implemented expansionary fiscal spending to tackle the fallout of the pandemic, the finance ministry said Tuesday.
The national debt, which covers bond sales and financial borrowing by central and provincial governments, reached a record 846.9 trillion won (US$750.5 billion) as of end-December, up 123.7 trillion won from the previous year, according to a report on the 2020 national settlement.
The settlement report, approved by the Cabinet, will be submitted to the National Assembly by May after a review by the state audit agency.
The sharp gain in national debt came as the government sold more bonds to finance its expansionary fiscal spending designed to cope with the economic fallout of the COVID-19 pandemic.
Last year, the nation drew up four rounds of extra budgets totaling 67 trillion won in a bid to fund emergency relief packages. The 2020 national budget amounted to 512.3 trillion won.
Accordingly, the country’s debt-to-gross domestic product (GDP) ratio came to 44 percent last year, up from 37.7 percent the previous year.
Its fiscal deficit also widened last year as pandemic-related expenditures shot up while tax revenues declined, the ministry said.
The managed fiscal balance, a key gauge of fiscal health, logged a deficit of 112 trillion won last year, the largest in nine years and more than doubling from a shortfall of 54.4 trillion won in 2019.
Asia’s fourth-largest economy contracted 1 percent last year, the first yearly retreat since the 1997-98 Asian financial crisis. But it contracted by a far smaller margin than most other advanced nations.
Last month, the country created another supplementary budget designed to finance the 20.7 trillion-won aid package for the self-employed and vulnerable groups. It drew up a record 558 trillion-won national budget for this year.
With the latest extra budget, the national debt is expected to reach 965.9 trillion won this year. The debt-to-GDP ratio will likely reach 48.2 percent.
In 2022 budget guidelines unveiled last week, the finance ministry said it will seek to enhance fiscal soundness and curb debt growth to manage state coffers in a sustainable manner.
Meanwhile, the country’s state assets amounted to 2,490.2 trillion won as of end-December, up 190.8 trillion won from the previous year. Its total liabilities reached a record 1,985.3 trillion won, up 241.6 trillion won from a year earlier and marking the largest yearly gain since 2012.
The sharp rise in total liabilities resulted from an increase in accrued liabilities on state pension programs and sales of government bonds, the ministry said.