South Korea's government debt as a share of gross domestic product (GDP) will exceed the average of advanced non-reserve currency nations for the first time next year, according to the International Monetary Fund (IMF). While the absolute level remains below that of the Group of Seven (G7), the pace of increase outstripping economic growth is emerging as a burden.
According to the April issue of the IMF's Fiscal Monitor released on the 20th, Korea's general government debt (D2) ratio is projected to rise from 54.4% this year to 56.6% next year. That exceeds the 55.0% average of 11 advanced non-reserve currency countries classified by the IMF. The gap has already narrowed to 0.3 percentage points this year, putting Korea on the verge of overtaking the average. General government debt (D2), which adds debt of non-profit public institutions to central and local government debt (D1), serves as a benchmark for comparing fiscal soundness across countries.
The bigger concern is the pace of increase. The IMF projects Korea's debt ratio will rise by an annual average of 3.0 percentage points over the five years from 2026 to 2031. That is the second-highest growth rate among the 11 non-reserve currency countries after Hong Kong (7.0%), and the highest in terms of the scale of increase. Over the same period, Norway (-17.4 percentage points), Iceland (-10.6 percentage points), and New Zealand (-1.9 percentage points) are projected to see their ratios decline.
The IMF report specifically named Korea and Belgium, stating that "significant increases" in debt ratios are expected.
The debt ratio itself is lower than the G7 average of 120-130%, which includes the United States, Japan, and the United Kingdom. However, non-reserve currency countries can be more vulnerable to capital outflows and exchange rate volatility in the event of external shocks, prompting calls for stricter fiscal management standards.
Domestic statistics point to the same trend. According to the Korean Statistical Information Service (KOSIS), nominal GDP grew by an annual average of 5.3% from 2020 to 2025, while central and local government debt (D1) rose by an annual average of 9.0% — about 1.7 times the growth rate. The debt ratio, which had been below 40% before COVID-19, rose rapidly through the pandemic and is showing signs of becoming entrenched. Concerns are mounting that if Korea fails to manage the pace while fiscal room remains, overtaking the average may not prove a temporary phenomenon.
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