Debt level jumps under Park gov’t

As of late last year, the national debt stood at 1,117 trillion won ($1.06 trillion), up from 902 trillion won the previous year, indicating that the country’s debt burden is surging under the Park Geun-hye government, which has pledged to spend about 135 trillion won on welfare plans despite falling tax revenues.

According to a report by the Ministry of Strategy and Finance that was confirmed at a cabinet meeting yesterday and will be submitted to the National Assembly, the main cause of increasing debt is growing future pension expenditure for public servants and soldiers.

Of the total debt, future expenditure for pensions accounted for 596.3 trillion won in 2013, up 159 trillion won from the previous year.

Future pension costs are rising because the number of workers and average service years are both increasing. The cost also includes likely increases in wages and inflation rates.

But the Finance Ministry emphasized that future pension debt isn’t fixed in terms of when to pay and how much will be paid, which means the concept is different from normal national debt or liabilities.

“It is not appropriate to regard the total debt, including the future pension costs, as the nation’s real debt and compare it with that of others, which might have a negative impact on the country’s overseas reputation,” said a ministry official.

The Korean government’s debt, including that of the central government, provincial governments, state-run funds and nonprofit organizations, totaled 504.6 trillion won in 2012, claiming 36.6 percent of gross domestic product.

“The future pension costs are not going to be paid with taxpayers’ money solely,” the ministry said in the report.

The costs will be covered by the profits of each pension fund unless the funds fall short of their target.

Some economic experts argue that the government purposely excludes future costs from its aggregate debt.

Cho Dong-geun, a professor at Myongji University said at a seminar late last year that the government should correct its debt estimation to 1,413 trillion won for 2013, a figure that covers all long-term costs and the debt of all public institutions.

The government’s fiscal account was the worst since the 2008 global financial crisis. Its fiscal deficit recorded 21.1 trillion won.

The deficit was largely due to decreased tax revenue last year and the government’s supplementary budget to boost the economy in May.

The country’s liabilities reached 464 trillion won, up from 425.1 trillion won, due to treasury bond issuances.

National debt per head is calculated to reach 9.6 million won in 2013, up from 8.8 million won in 2012, the ministry said.

BY song su-hyun [ssh@joongang.co.kr]