A mountain of debtThe country is in a deep debt mess. Grand National Party lawmaker Lee Han-gu claimed that the national debt stands at a colossal 1,439 trillion won ($1.2 trillion), dwarfing the government’s official - and in this case relatively paltry - figure of 308 trillion won.
Lee’s number is a broader sum than the government’s, a kind of de facto debt. It includes basic debt, interest and payment obligations as well as borrowing from pension funds and state corporations, plus project financing.
But Lee might have stretched a bit too far. Pension financing, for instance, is a potential debt, and incorporating it into the national debt goes against international guidelines.
Yet we cannot take these figures lightly or simply blow them off. We in fact believe that the government is too relaxed and lenient about credit control. It maintains that loans to state corporations and public project financing are separate and cannot be regarded as fiscal debt.
But deficits in public infrastructure projects erode fiscal bottom lines, as seen in the case of the Incheon International Airport Railroad. The government merged the Incheon International Airport Railroad into Korea Railroad and tossed the heavy bill of renovating four major rivers into the laps of the Korea Water Resources Corp. to lessen the burden on the fiscal balance.
In short, the government hasn’t done enough to improve its debt load.
It is not too late for the government to turn more of its attention to this growing problem. Official figures also demand immediate action. Fiscal debt ballooned to 366 trillion won this year from 60 trillion won in 1997. The figure is expected to reach 500 trillion won by 2013.
The government should remember its promise of “frugality and prudence” in fiscal spending. We are not discouraging a stimulus to boost the economy, nor are we arguing against spending to strengthen the social safety net. But we are emphasizing that spending now translates into higher debt in the future. The government must thoroughly deliberate before launching a large state infrastructure project, and it must budget wisely when it comes to spending. Otherwise, we will come up way too short when we have to fund an aging society or a unified nation.
We must keep the nation’s bottom line healthy now, because we will need to spend more in the future.