Daejeon City Expects 1 Trillion Won in Year-End Local Bonds, Tightens Management Reins

Data on local bond issuance status in Daejeon City over the past 4 years. Provided by Daejeon City.

[Asia Economy (Daejeon) Reporter Jeong Il-woong] The scale of local bonds managed by Daejeon City is expected to exceed 1 trillion won by the end of this year.

According to the city on the 21st, the scale of local bonds at the end of last year was 847.6 billion won, and reflecting this year's increase (planned amount) of 214.5 billion won, it is expected to exceed 1 trillion won by the end of the year. This is an increase of 466 billion won compared to 596.1 billion won in 2018.

The city analyzes that the sharp increase in local bonds was largely due to land compensation for long-term unexecuted urban parks and expanded fiscal expenditures in response to COVID-19.

For example, with the implementation of the urban park sunset system on July 1, 2020, 139 billion won was used to purchase land for long-term unexecuted urban parks, and 97 billion won in disaster relief funds (Daejeon-type) used to overcome the COVID-19 crisis in 2020 were each covered by local bonds.

In addition, last year, as fiscal expenditures expanded due to the prolonged COVID-19 pandemic (an increase of 494.9 billion won in city funds), the city explains that increasing the issuance of local bonds to cover the shortage of funds for regional SOC projects also had an impact.

Furthermore, the city views the increase in local bonds as mainly caused by the increased city fund burden due to the expansion of government welfare budgets and the increase in new welfare budgets, which led to a shortage of resources.

In fact, the total budget increase this year compared to 2018 for major national subsidy projects such as basic pension, medical benefits, livelihood benefits, and child allowance is 358.9 billion won, with the increase in city funds excluding national funds reaching 52.5 billion won. For the new project, Daejeon-type basic childcare allowance, the amount invested this year alone is understood to be 81.8 billion won.

As local bonds increase, the debt ratio compared to the city budget is also expected to rise from 10.2% in 2018 to 14.4% by the end of this year.

However, Daejeon's debt ratio is lower than the average debt ratio of 16.4% for the eight special and metropolitan cities last year, so it is not considered dangerous. Nevertheless, considering the recent steady increase in the scale of local bonds, the city believes that strong management of local bonds is necessary.

A city official stated, “The city's debt has rapidly increased over the past four years due to COVID-19 response and compensation for long-term unexecuted parks, and is expected to exceed 1 trillion won,” adding, “This is likely to become a burden that future generations will have to bear.”

He continued, “Considering these circumstances, the city plans to minimize new local bond issuance and focus on planned repayment to enhance fiscal soundness.”

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