National debt exceeds ￦400T for first time

Korea’s national debt surpassed 400 trillion won ($351.2 billion) for the first time last year as the government increased borrowing to fill its budget gap, the Ministry of Strategy and Finance said yesterday.

According to a ministry report, the national debt including central and local government borrowing rose by 28.5 trillion won from a year earlier to stand at 420.7 trillion won last year. This represented 34 percent of the nation’s GDP and 8.45 million won of government debt per capita.

Central government debt grew by 29 trillion won to 402.8 trillion won for fiscal year 2011. Meanwhile, local government borrowing is estimated at around 17.8 trillion won, with the final figure to be made available at the end of June, the ministry said.

The increase in spending was linked to a continued borrowing streak aimed at buoying the economy and shaking off the lingering effects of the 2008 global financial crisis.

“Last year’s increase can be attributed to the issuing of government bonds aimed at filling the gap in government budget spending,” the ministry said. Strengthened welfare programs also played a part, as the 6.3 percent on-year increase in welfare spending last year outpaced the 5.5 percent total increase in government spending.

This led the Korean government to report a 13.5 trillion won deficit in 2011 - excluding national pensions - which, at 1.1 percent of GDP, remained largely unchanged from 2010.

Reflecting the rise in debt, the ratio of national debt to GDP inched up 0.6 percentage points to 34 percent.

Last year, the government’s gross revenue including taxes and other earnings amounted to 270.5 trillion won, up 9.3 trillion won from the previous year. Its gross expenditure came to 258.9 trillion won, an increase of 10.3 trillion won from 2010.

The government posted a 11.6 trillion won surplus in its consolidated fiscal account last year. Excluding spending on social welfare, however, it logged a fiscal deficit of about 13.5 trillion won, the report showed.

The ministry said the settlement of accounts report will be forwarded to the Board of Audit and Inspection for further review before it is sent to the National Assembly by the end of May for final approval.

By Lee Jung-yoon, Yonhap [joyce@joongang.co.kr]