South Korea’s national debt rose by 93.3 trillion won ($85.7 billion) last year largely due to the government’s soaring pension spending, data showed Tuesday.
The Ministry of Strategy and Finance said in its settlement of accounts for 2014 that the national debt reached 1,211.2 trillion won in 2014, up 10.3 percent from the previous year.
The central and regional governments’ combined debt accounted for 530.5 trillion won of the nation’s total liabilities, which is an increase of 40.7 trillion won from a year earlier.
The government’s overall debt is equal to 33.9 percent of the nation’s gross domestic product last year, up from 32.5 percent in 2013.
The net national assets stood at 543.3 trillion won, down 5.1 trillion won on-year from 548.4 trillion won. Total assets reached 1,754 trillion won.
“The increase came mostly from spending on the military and civil servants’ pension and from Treasury bonds,” the ministry said in a press release.
According to the accrual accounting calculation, the pension spending took up about 50.7 percent of the total hike, and Treasury bond issuance 41.2 percent, together making up 91.8 percent, or 85.7 trillion won.
Although the accounting reports are required to be complied using the accrual accounting method, the ministry’s report on the settlement of accounts also used the cash basis accounting method. The former is widely considered the standard accounting practice for most large-scale entities ― with the operational transaction made in advance and the actual cash transaction following later.
Given the cash accounting format, the national debt amounted to about 39 trillion won, because the cash spending for pensions are long-term transactions, and are mostly excluded.
The Finance Ministry claimed in the report that the country’s fiscal soundness is well above the average rate of the Organization for Economic Cooperation and Development members if the national debt is calculated by the cash basis accounting method.
“Compared to 2007, the country’s national debt rose 7 percentage points as of 2014, while the OECD average in the same period reached 25.2 percentage points,” a ministry official said.
“Last year’s national debt rose due to a deficit in the operational budget and the spending for expansionary policies to vitalize the economy,” said Noh Hyeong-ouk, deputy finance minister for fiscal affairs.
The settlement of accounts is slated to be submitted to the National Assembly in late May.
By Chung Joo-won (joowonc@heraldcorp.com)
