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Last year, sovereign debt increased at a record high. This is due to the increase in debt from the central government in response to Corona 19 while tax revenue is decreasing. As the deficit fiscal stance continues this year, the national debt is expected to exceed 2,000 trillion won.
On the 6th, the government deliberated and decided on the report of’National Settlement for FY2020′ at the State Council. Last year’s national debt was 1985 trillion and 300 billion won, an increase of 241.6 trillion won from the previous year’s highest. Considering the fact that the expansion of finances due to Corona 19 this year continues, the national debt is expected to exceed 2,000 trillion won this year.
The national debt, excluding the pension provision debt, which is recognized as a debt in advance in consideration of future pension payments, was 84.89 trillion won, an increase of 12.3 trillion won from the previous year. The ratio of national debt to gross domestic product (GDP) jumped from 37.7% in 2019 to 44.0% last year. The national debt per capita increased by more than 2 million won to 16,33 million won from 141.1 million won.
Of the national debt, 819 trillion won was the debt of the central government. The government expected the central government’s debt to be 81.190 trillion won in the fourth supplementary administration last year, but as a result of the final settlement, the debt width increased. On the other hand, the preliminary local debt was revised from 32 trillion won to 27 trillion won. Accordingly, the total amount did not change significantly. Debt fluctuations were largely due to housing transactions. It is explained that the central government’s debt increased as the issuance of national housing bonds increased as housing transactions increased. The decrease in local debt also affected the lower need for debt issuance due to an increase in acquisition tax resulting from housing transactions.
The consolidated fiscal balance, minus total expenditure from the government’s total revenue, recorded a deficit of 71.2 trillion won. Compared to the previous year’s 12 trillion won deficit, the deficit increased by nearly 60 trillion won. However, it was less than the 84 trillion won the government expected through the fourth supplementary administration last year. The Ministry of Strategy and Finance explained that the increase in national tax revenues, such as capital gains tax and securities transaction tax, increased more than expected at the time of the supplementary administration.
Excluding the four major security funds from the integrated fiscal balance, the management fiscal balance, which shows’real country life’, recorded a deficit of 112 trillion won. It was the worst since it was counted in 1990. The ratio of the managed fiscal deficit to GDP was 5.8%.
Regarding the criticism that the country’s debt is close to 2,000 trillion won, the Ministry of Knowledge Economy explains that it is not the actual debt that has occurred, but the effect of the pension provision debt, which is a debt on the books. The pension provision is converted into the present value of future pension expenditures and is calculated by taking into account the discount rate, inflation rate, and wage increase rate taking into account the government bond interest rate. The government explained that the total amount of debt should not be regarded as a non-determined debt, since more than half of last year’s national debt amounted to 1267 trillion won, which is unconfirmed debt such as provision for pension.
However, it is also pointed out that it is difficult to avoid criticism of the rapid increase in debt due to an increase of 111.6 trillion won, excluding unconfirmed debt. Regarding this, an official from the Ministry of Finance said, “The increase in debt due to the response to the corona crisis is lower than in major countries,” and “Financial soundness is at a good level.”
Reporter Kang Jin-kyu [email protected]
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