By Kim Jae-kyoung
Staff Reporter



South Korea’s national debt exceeded the 200-trillion won mark for the first time ever last year, due to excessive government intervention in the currency market and its expansionary fiscal spending.

The Ministry of Finance and Economy (MOFE) said Tuesday that national debt reached 203.1 trillion won ($203.1 billion) at the end of last year, up 22.5 percent or 34.7 trillion won from 165.7 trillion won a year ago.

National debt grew much faster than the economic growth of 4.3 percent last year.

The increase came after the government issued treasury bonds worth 15 trillion won to cover public funds spent on financial restructuring and raised 17.8 trillion won in foreign exchange stabilization bonds to buy dollars to curb the won’s rise against the U.S. unit.

The government posted 10.2 trillion won in foreign exchange losses arising from the issuance of currency stabilization bonds amid falls in the value of the dollar.

Market experts said that although the debt-to-gross domestic product (GDP) ratio is lower than other nations and the debt amount remains manageable, the pace of growth is a big concern.

The debt growth amount widened to 37.4 trillion won last year from 22.1 trillion won in 2003, 11.5 trillion won in 2002 and 10.2 trillion won in 2001.

``National debt is within the government’s controllable level. But the government should be alert to the pace of growth and make efforts to slow the pace,’’ Samsung Economic Research Institute (SERI) managing director Cheong Mun-kun told The Korea Times.

``Since the nation is moving toward an aged society faster than anyone else in the world, maintaining sound national finance is very important to keep pension funds afloat in the future,’’ he added.

Per capita national debt, when the population is set at 48 million, came to 4.22 million won last year, up from 3.45 million in 2003 and 2.8 million in 2992.

The last year’s national debt is equivalent to 26.1 percent of GDP, up 3.2 percentage points from the previous year.

The debt-to-GDP ratio has steadily climbed in the last four years, from 19.2 percent in 2000 to 19.6 percent in 2001, 19.5 percent in 2002 and 22.9 percent in 2003.

Still, the government downplayed concerns over soaring debt, stressing that the debt is manageable as Korea’s debt-to-GDP ratio is lower than those of other advanced economies and the average for Organization for Economic Cooperation and Development (OECD) member countries of 76.8 percent.

The debt-to-GDP ratio was 63.5 percent for the U.S., 163.5 percent for Japan, 67 percent for Germany, 74 percent in France and 43.4 percent in Britain in 2004.

``National debt has been on a steady rise, but considering the amount of debt, fiscal conditions remain sound,’’ an MOFE official said.

In the meantime, the MOFE said that the central government’s total obligations rose by 23.48 percent to 196.1 trillion won at the end of last year.

Debt owed by provincial governments declined 0.2 trillion won to 19.5 trillion won last year.

kjk@koreatimes.co.kr