[EDITORIALS]Disturbing News on National DebtThe possibility of a "second economic crisis" has become a hot topic because of the expansion of the national debt. To make matters worse, numerous cases in which the government mismanaged public funds have been uncovered, shocking the public. The public funds plowed into troubled financial institutions are regarded as the main reason for the nation's mountain of debt.
The chances of a national debt crisis, ignored as Korea raced to recover from the financial crisis in 1997-98, were only recently acknowledged. The national debt has exceeded the critical level. Since 1998, the government has issued 120 trillion won ($93.3 billion) of bonds to bolster the declining economy, including money to cut unemployment. The government has also raised 159 trillion won of public funds through bonds issued by the Korea Deposit Insurance Corp. and the Korea Asset Management Corp., both state-run entities, to restructure debt-ridden corporations and financial institutions.
The government will have to use tax revenues to make up for deficits in civil servant and military pension funds and public health insurance, whose finances have been ruined. If those quasi-government debts are taken into consideration, the national debt would be more than 400 trillion won, analysts said.
The government has paid only interest on its debt. But, beginning next year, the amount of maturing debt will expand. The government has set up a 10 trillion won budget to pay the interest on government bonds and bonds issued to raise public funds.
Since the government must set aside 8.7 percent of the national budget to pay interest, its expenditures inevitably must be reduced. In 2003, when a new administration comes into power, it will face 27.5 trillion won in principal and interests. Unless the Korean economy surges, sending the share prices of the banks in which the government has placed public funds 10 times higher, the government will have difficulty even paying government employees.
Many analysts recognize the looming crisis and recommend that the schedules and methods for repaying the national debt be readjusted. A rollover of maturing debts would be far from sufficient, analysts said. First, the government should change management of the national finance and pension systems.
Considering the current situation, the revelation by the Board of Audit that former major shareholders of some debt-ridden companies that received public money for bailouts concealed $400 million in property is disappointing. The audit agency also revealed that the government spent trillions of won of public funds to extend the life of merchant banks. The board detected the embezzlement of public funds by trustees at bankrupt financial institutions and moral hazard practices.
The national debt crisis is a more important issue than the replacement of the present government. Whoever comes into power through next year's presidential election will encounter difficulty managing the country unless the nation's debt problems are solved. The government and the National Assembly should work together to solve the debt crisis.
The government should reform its policies on income and expenditures, and it should stop unnecessary spending. The government should consider launching an Assembly review of the use of public funds and the national debt redemption plan, following the agreement between the ruling and opposition parties to work together to restore the nation's finances.