Park Hong-keun, Minister of the Ministry of Planning and Budget, pushed back against the International Monetary Fund's (IMF) warning that South Korea's national debt is rising too fast, calling it an "overestimate."
At his first press briefing since taking office on Tuesday, Park said, "We must consider not only the absolute level of the debt ratio but also the capacity to manage it," adding, "Korea's level remains low compared to major economies."
The IMF had projected that South Korea's national debt-to-GDP ratio would rise to 63.1% by 2031, pointing to the rapid pace of increase. Following the IMF warning, Kim Yong-beom, head of the Presidential Office Policy Chief, and Ryu Duk-hyun, Presidential Office Fiscal Planning Advisor, both pushed back, calling it "fear-mongering." Park, as head of Korea's fiscal authorities, has aligned himself with this position.
"The IMF projection is merely an estimate that reflects policy responses and timing," Park said. "In 2021, the IMF projected Korea's 2024 debt ratio at 61.5%, but the actual figure came in at just 49.7%."
While acknowledging the need to manage the pace of debt growth itself, Park emphasized that the government is already developing countermeasures. "We have introduced a 10% restructuring of mandatory spending for the first time, and we are also pushing for a 15% cut in discretionary spending," Park said. "We are managing the pace of debt growth through multiple mechanisms." Park envisions cutting approximately 50 trillion won ($36 billion) through these measures.
However, Park took a more cautious stance on the introduction of a fiscal rule. "This is a time when we need to boost potential growth, and a certain level of fiscal input is unavoidable," he said, drawing a line against setting rigid thresholds. When asked whether excess tax revenue generated again this year from the semiconductor boom would be used for debt repayment, Park replied, "We will boldly restructure high-cost, low-efficiency sectors, but investment to boost the growth rate is necessary," adding, "Debt repayment will be carried out according to prescribed procedures."
