South Korea's national debt surged by nearly 130 trillion won last year, surpassing the 1,300 trillion won mark for the first time in history. The managed fiscal balance, a key gauge of the government's fiscal health, posted a deficit exceeding 100 trillion won for the second consecutive year. With fiscal expansion unavoidable to respond to the high oil price crisis, the burden on the government to maintain fiscal soundness is expected to grow further.
The Ministry of Economy and Finance (MOEF) deliberated and approved the "Fiscal Year 2025 National Settlement Report" at a Cabinet meeting on the 6th.
Last year, combined central and local government debt totaled 1,304.5 trillion won ($958 billion), an increase of 129.4 trillion won from the previous year. Central government debt rose 127 trillion won to 1,268.1 trillion won, while net local government debt came in at 36.4 trillion won. The increase in central government debt was driven by expanded issuance of treasury bonds (113.5 trillion won) and foreign exchange stabilization fund bonds (16.7 trillion won). However, national debt rose only 2.6 trillion won compared with the budget estimate of 1,301.9 trillion won for this year.
National debt has continued to climb alongside the expansion of the economy. From the 600 trillion won range during 2016–2018, national debt rose to 723.2 trillion won in 2019 and surged through the COVID-19 period to 846.6 trillion won in 2020 and 970.7 trillion won in 2021. In 2022, it breached the 1,000 trillion won threshold for the first time at 1,067.4 trillion won. The pace of increase slowed to the 50–60 trillion won range in 2023 (1,126.8 trillion won) and 2024 (1,175.2 trillion won), but expanded again to more than 100 trillion won last year.
The national debt-to-GDP ratio reached 49.1%, up 3.0 percentage points from 46% in the prior year. The increase in government borrowing outpaced economic growth, analysts said. However, the ratio fell 0.1 percentage point compared with the budget estimate.
Total national liabilities stood at 2,771.6 trillion won last year, up 185.9 trillion won from 2,585.7 trillion won the previous year. Confirmed liabilities such as government bonds and borrowings led the increase at 140.1 trillion won, while pension provisions expanded by 31.5 trillion won.
National liabilities are a broader concept than national debt. While national debt refers to obligations with fixed repayment dates and amounts — such as government bonds — national liabilities also include "unconfirmed liabilities," obligations whose repayment timing and amounts are not precisely determined. The figure represents the sum of all payments the government may potentially need to make in the future.
Total revenue last year came in at 637.4 trillion won, falling 5 trillion won short of the original budget. Total expenditure was 684.1 trillion won, a decrease of 19.1 trillion won. The consolidated fiscal balance, calculated as total revenue minus total expenditure, recorded a deficit of 46.7 trillion won.
The managed fiscal balance posted a deficit of 104.2 trillion won, a slight improvement from the previous year's deficit of 104.8 trillion won, but failed to break free from the 100-trillion-won deficit range for the second straight year. The managed fiscal balance — the consolidated fiscal balance excluding the surpluses of four social security funds including the National Pension Service — serves as an indicator of the government's real fiscal health based on its original budget.
The managed fiscal balance as a share of GDP stood at 3.9%, improving 0.2 percentage points from the prior year and 0.3 percentage points compared with the budget estimate. However, observers note it is premature to say fiscal conditions have significantly improved, given that last year's GDP growth partly reflected the effect of a weaker won.
Total tax revenue last year was 597.9 trillion won, while total tax expenditure came to 591 trillion won. After subtracting 3.7 trillion won in carryovers to the next fiscal year from total expenditure, the settlement surplus was 3.2 trillion won. Of this, the 100 billion won general account settlement surplus will be fully allocated to local government fiscal transfer adjustments under Article 90 of the National Finance Act. The 3.1 trillion won special account settlement surplus will be processed as internal revenue for the respective special accounts in accordance with their governing statutes.
The government plans to submit the Fiscal Year 2025 National Settlement Report to the National Assembly by the end of May, after an audit by the Board of Audit and Inspection.
Deputy Prime Minister and MOEF Minister Koo Yun-cheol said, "Fiscal year 2025 marks a departure from the pattern of large-scale tax revenue shortfalls and deteriorating fiscal balances seen in previous years, showing a normalization of fiscal management." He added, "In particular, the National Pension Fund saw a significant increase in investment returns, which has greatly enhanced the fund's long-term fiscal stability and is expected to substantially ease public anxiety over fund depletion."
