South Korea's sovereign debt based on the financial statements recorded 1,682.70 trillion won (US$1.48 trillion) last year. Korea's national debt is mounting but the ruling Democratic Party, the Blue House and the government have decided to propose a supplementary budget in the scale of up to 9 trillion won (US$7.92 billion) once again.
The government considered and passed “2018 fiscal year national financial report” at a Cabinet meeting on April 2. As a result of the government’s financial statement settlement based on the accrual basis at the time of expenditure and cost occurrence, the national debt came to 1,682.70 trillion won (US$1.48 trillion) last year, up 126.90 trillion won (US$111.61 billion), or 8.2 percent, from 1,555.80 trillion won (US$1.37 trillion) a year earlier.
The figure grew more than 100 trillion won (US$87.95 billion) for three years in a row since 2016, hitting a new record high. It nearly doubled in seven years from 773.50 trillion won (US$680.30 billion) in 2011 when the government first started settling its national debt based on the accrual basis.
Out of the national debt increases last year, 21.70 trillion won (US$19.09 billion) came from the issuance of government bonds which was designed to support the government expenditures, and 94.10 trillion won (US$82.76 billion), which accounted for three-fourths of the total, resulted from budgets spent to cover a shortage of funds for pensions for civil servants and veterans. The liabilities of pension allowances showed the highest growth last year since 2013 when the data collection methods were reformed.
The liabilities for pension allowances, which are the amount of total pensions to be paid to civil servants and veterans by the government in the future, stood at 939.90 trillion won (US$826.65 billion) last year, taking up 55.8 percent of the total sovereign debts on the financial statements. Per capita allotment surpasses 18 million won (US$15,831). The liabilities for pension allowances has been rising over 90 trillion won (US$79.16 billion) every year after 2015. The figure also grew 94.10 trillion won (US$82.76 billion) last year, showing the highest growth after the statistics system was revised in 2013. Experts point out that South Korea can face a financial crisis with the current trend as the liabilities for pension allowances exceed 1,000 trillion won (US$879.51 billion) this year.
The problem is that the government is already making up the shortfalls in pensions for civil servants and veterans with taxes. The government spent 3.80 trillion won (US$3.34 billion) of pension payment allowances last year. Kim Sang-bong, aprofessor at Hansung University, said, “It shows that it is difficult to provide pensions with contributions and allotments created by civil servants and veterans alone. It is aself-evident factthat the government will face greater difficulties in the future.”