[EDITORIALS]Melting a snowballing debtIt is troubling that the country is so much in debt and sinking further at an increasing rate. As of the end of last year, the country’s debts were 248 trillion won ($255 billion) ― about 5.1 million won per person. It was the first time the percentage of debts exceeded 30 percent of the gross national product.
Of course, the Finance Ministry’s explanation that the burden of national debts is at a stable level compared to foreign countries is reasonable.
By 2007, the present trend of steeply increasing national debt might have calmed, because the conversion of the deposit insurance bonds and asset management corporation’s bonds, which were issued to create public funds during the Asian financial crisis of 1997-98, are to be completed within this year. About 13 trillion won worth of those bonds have been converted into national bonds every year.
However, there is something that makes us feel uncomfortable. First of all, in the past three years, the national debt has increased by 86 percent. Last year alone, 15 trillion won in foreign exchange stabilization bonds were issued in order to defend the exchange rate. In addition, 9 trillion won worth of deficit national bonds were issued. These factors may be indicators that the chronic deficit public finances will be seen as normal.
Increased welfare costs due to the low birth rate and an aging society, as well as the costs of unification ― whenever it might happen ― makes the situation even more difficult to feel comfortable about.
Frankly speaking, the government’s explanations of the country’s debts are difficult to believe. The Kim Dae-jung administration boasted that the percentage of debts to gross domestic product was around 10 percent and that there was nothing to worry about.
However, the government did not include government-guaranteed debts in its calculations, and when these bonds were converted to national bonds, increasing the total issuance of foreign exchange stabilization bonds, the country’s debts began to snowball.
It is equally hard to trust the current government. It is difficult to imagine that debts will be “solved” when the cost of public investments and welfare expenses are increasing and civic servants are increased in number. The government is at peace, but people are becoming increasingly worried.
It is not too late to begin a systematic management of national debts. The governing and opposition party must first pass the dormant national finance laws at the National Assembly. The reckless government expenditure system must also be improved immediately.
Learning lessons from other’s experiences is good. Yet we should be very careful which lessons we learn. Those who already have their finances destroyed and have been rendered economically impotent are poor examples.
One of the most likely reasons we overcame the financial crisis was because we had strong finances. In the long term, increasing tax revenue through economic growth is the only shortcut in restoring sound finances.