Last Year's Deficit Bonds Interest Highest in 4 Years... "Urgent Need to 'Surgery' Cash Welfare"
Last Year 8.3 Trillion Won, 600 Billion Won Increase Compared to 4 Years Ago
Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance. / Photo by Hyunmin Kim kimhyun81@
View original image[Sejong=Asia Economy Reporter Moon Chaeseok] Last year, the interest amount on deficit-financed debt recorded the highest level in four years since 2017. The interest on deficit bonds is paid from the budget funded by taxpayers' money, and despite the decline in interest rates, the increase in government bond issuance has led to a corresponding rise in interest payments. As the possibility of interest rates rising grows, the interest burden is expected to increase further.
According to the 'Annual Deficit Bond Interest Payment Status' received by Ryu Seong-geol, a member of the National Assembly's Planning and Finance Committee from the Ministry of Economy and Finance on the 14th, the interest payment on deficit bonds increased from 7.7 trillion won in 2017 to 8.3 trillion won last year based on settlement data. During the same period, the interest rate fell from 2.7% to 2.1%. Although the interest rate decreased, the payment amount actually increased.
The problem lies in the period after next year. If the base interest rate rises and market interest rates follow suit, the interest burden will inevitably grow larger. The Ministry of Economy and Finance has set next year's interest payment amount at 12.3 trillion won, reflecting an interest rate of 2.6%. This is 0.2 percentage points higher than the 2.4% reflected in this year's budget. A ministry official explained, "This was preemptively reflected due to many forecasts of interest rate increases next year."
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Experts have urged that the intensity of fiscal expenditure restructuring needs to be increased even now. They emphasize the need to focus more on reducing debt. Professor Hong Woo-hyung of Hansung University's Department of Economics said, "Among fiscal expenditures, it is urgent to boldly reduce cash support policies such as child allowances, youth allowances, basic pensions, and local education finance grants."
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