Government Temporary Borrowing Accumulates to 142.5 Trillion Won... Highest in 10 Years

Interest repayment amount alone 94.4 billion won... "Could harm fiscal soundness... Fiscal rules urgently needed"

[Image source=Yonhap News]

[Sejong=Asia Economy Reporter Kim Hyunjung] The government’s short-term borrowings due to temporary cash shortages are estimated to have reached 142.5 trillion won. This is the highest level in the past 10 years, raising concerns that it could undermine fiscal soundness.

According to data on annual temporary borrowing amounts and interest repayment costs submitted by the Ministry of Economy and Finance to Rep. Yoo Kyung-joon of the People Power Party, a member of the National Assembly’s Planning and Finance Committee, the cumulative amount of temporary borrowings by the government up to September this year is estimated at 142.5 trillion won. When the government fails to secure revenue needed for expenditures, it issues treasury bills or temporarily borrows from the Bank of Korea to finance spending first and later repays the debt through revenue. Treasury bills and Bank of Korea temporary borrowings serve as the government’s “emergency fund” procurement, ranging from short-term funds lasting a day or two to several months.

This year, the government temporarily borrowed a total of 142.5 trillion won, including 45.3 trillion won in treasury bills and 97.2 trillion won in Bank of Korea borrowings, marking the largest scale in the past decade. Government temporary borrowings increased from 19.7 trillion won in 2011 (11.7 trillion won in treasury bills and 8 trillion won in Bank of Korea borrowings), 59.4 trillion won in 2012 (22.4 trillion won in treasury bills and 37 trillion won in Bank of Korea borrowings), and 111.2 trillion won in 2013 (36.7 trillion won in treasury bills and 74.5 trillion won in Bank of Korea borrowings), before decreasing to 71 trillion won in 2014 (38 trillion won in treasury bills and 33 trillion won in Bank of Korea borrowings).

Thereafter, it was 88.5 trillion won in 2015 (37.5 trillion won in treasury bills and 51 trillion won in Bank of Korea borrowings), 29.9 trillion won in 2016 (20.9 trillion won in treasury bills and 9 trillion won in Bank of Korea borrowings), 9.9 trillion won in 2017 (7.9 trillion won in treasury bills and 2 trillion won in Bank of Korea borrowings), and 2 trillion won in 2018 (2 trillion won in treasury bills).

Then, it rose again to 84.7 trillion won in 2019 (48.7 trillion won in treasury bills and 36 trillion won in Bank of Korea borrowings), and as of September this year, it has already exceeded 140 trillion won, with expectations that it will increase further by year-end.

The average balance of temporary borrowings, calculated excluding amounts already repaid, is estimated at 15.7 trillion won as of September this year. In the past 10 years, the average balance of temporary borrowings exceeded 10 trillion won only in 2013 (10.6 trillion won) and 2019 (10.1 trillion won), but this year it has significantly surpassed 10 trillion won as of September. The increase in temporary borrowings is due to reduced revenue amid the COVID-19 pandemic while expenditures surged sharply.

A considerable amount has also been spent on interest repayments. The estimated interest repayment amount for temporary borrowings as of September this year is 94.4 billion won, with 53.5 billion won in treasury bill interest and 40.9 billion won in Bank of Korea borrowing interest. However, due to low interest rates, the interest repayment amount is lower than in 2013 (200.644 billion won) and 2019 (100.648 billion won).

Rep. Yoo Kyung-joon emphasized, “The increase in treasury bills is problematic, but the reckless use of Bank of Korea borrowings, which incur additional costs, can rapidly undermine fiscal soundness,” adding, “The introduction of fiscal rules to prevent this is urgently needed.”

This content was produced with the assistance of AI translation services.