SEOUL, April 14 (Yonhap) — South Korea will review its post-pandemic fiscal policy as an economic recovery from the coronavirus outbreak will raise the need to normalize its expansionary fiscal spending, a senior government official said Wednesday.
Second Vice Finance Minister Ahn Do-geol said the government’s priority is placed on supporting an economic recovery with increased fiscal aid, but the country will also make efforts to enhance fiscal soundness in the face of the growing national debt.
“There is a need to preemptively prepare for how to manage the state coffers after the economy returns back to a normal recovery track,” Ahn told reporters.
Under the 2022 budget guidelines, the country plans to maintain an expansionary fiscal policy next year to underpin an economic recovery, but it will also seek to curb the growth of the national debt.
South Korea’s government debt grew by the largest-ever amount last year as it implemented expansionary fiscal spending to cope with the COVID-19 pandemic. The central and provisional government debt reached a record 846.9 trillion won (US$757 billion) as of end-December, up 123.7 trillion won from the previous year.
The country’s total liabilities came to 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 pension programs and sales of government bonds, according to the finance ministry.
But Ahn dismissed views by critics that the total liabilities are growing at a faster pace, saying the country has taken into account the occurrence of future debt more broadly than other nations.
Meanwhile, the vice minister raised the need for the private sector to provide support to an envisioned state scheme to compensate losses for smaller merchants hit hard by the COVID-19 pandemic.
“The government would face limitation in providing compensation solely with state support as the pandemic has incurred massive economic damage,” Ahn said.