National debt to reach W430 tln, interest W23 tln this year

Korea’s national debt this year has exceeded the threshold of 400 trillion won (352 billion U.S. dollars), meaning interest payments are snowballing at an alarming rate.

The Strategy and Finance Ministry said Monday that national debt will reach 436.8 trillion won (385 billion dollars) next year, up 36 trillion won (32 billion dollars) from this year. Interest payments will amount to 22.9 trillion won (20 billion dollars), up from this year`s estimated 20.3 trillion won (17.9 billion dollars).

The national debt has sharply increased in recent years in the wake of stimulus measures intended to kick-start the economy in the face of the global downturn.

The ministry said the national debt reached 282.7 trillion won (249 billion dollars) in 2006 and climbed steadily to 299.2 trillion won (264 billion dollars) in 2007 and 309 trillion won (272 billion dollars) in 2008. With the increase rate rising last year, the figure hit 359.6 trillion won (317 billion dollars) and should reach 400.4 trillion won (353 billion dollars) this year.

Interest payments have also shot up from 11.4 trillion won in 2006 (10 billion dollars) to more than 20 trillion won (17.6 billion dollars) this year. By next year, interest expenses will be double the figure five years ago.

Lee Young, an associate professor of economics and finance at Hanyang University in Seoul, said, “Many countries have increased fiscal spending because of the economic crisis but failed to implement measures to restore fiscal soundness afterwards, resulting in worsening fiscal health. For a small and open economy like Korea’s, even a minor shock can erode fiscal soundness. Stricter management of the national debt is necessary.”

turtle@donga.com