Fiscal burden grows amid expensive campaign pledges

Deficit-financed national debt, which must ultimately be repaid by taxpayers, has now exceeded 900 trillion won. Unlike debt that can be offset through the sale of government assets, deficit-financed debt must be repaid through tax revenue. The share of this type of debt within total government liabilities continues to grow and has now surpassed 70 percent, reflecting a deteriorating fiscal structure. With low economic growth weakening the tax base, addressing this rising burden has become increasingly urgent.

Including the second supplementary budget, total national debt is projected to reach 1,306.0 trillion won this year, up 125.4 trillion won from the year before. Of that, 923.5 trillion won, or 71.0 percent, is deficit-financed. This ratio, which stood at 60 percent in 2020, has increased by more than 10 percentage points in just five years. As deficit-financed debt grows, so do repayment obligations and interest costs, both of which erode fiscal flexibility. If this trend continues unchecked, it could lead to a credit rating downgrade or loss of international market confidence.

The larger concern is that deficit-financed debt is likely to climb even higher. Many of the administration’s campaign pledges call for significant public spending. Among the most notable is a plan to expand the monthly child allowance of 100,000 won, currently offered to children under age 8, to all children under 18. Other key promises include extending health insurance to cover long-term nursing care, introducing a basic income for rural residents, and easing pension reductions for elderly couples. Fully implementing these pledges would cost 210 trillion won over the next five years, yet the government has yet to present a clear plan to fund them.

Public spending to support economic recovery and reduce inequality is a legitimate responsibility of the state. However, spending that disregards fiscal constraints is not sustainable. Each policy promise must be carefully evaluated for its necessity and financial viability. Priorities should be set, and the pace of implementation adjusted. Trying to fulfill every campaign pledge without compromise risks undermining long-term fiscal stability. Ultimately, the most important promise to keep is the one to manage public finances responsibly over the next five years.