'Debt Ratio 300%' Financial Risk Public Institutions to Pursue 34 Trillion Won Financial Improvement Over the Next 5 Years

[Asia Economy Sejong=Reporter Son Seon-hee] The government announced that 14 public institutions designated as 'financially at-risk institutions' will implement a total of 34 trillion KRW worth of financial improvements over the next five years.

On the 31st, the Ministry of Economy and Finance held a Public Institution Management Committee meeting chaired by Second Vice Minister Choi Sang-dae, reporting the '2022-2026 Financial Soundness Plan for Financially At-Risk Institutions' and the '2022-2026 Mid-to-Long-Term Financial Management Plan for Public Institutions.'

Earlier in June, based on financial status evaluations and a debt ratio exceeding 200%, the government selected 14 public institutions, including Korea Land and Housing Corporation (LH) and Korea Electric Power Corporation (KEPCO), as 'financially at-risk institutions.' According to this financial soundness plan, these 14 institutions will pursue debt reduction and capital expansion totaling 34 trillion KRW over the next five years, including ▲asset sales of 4.3 trillion KRW ▲business adjustments of 13 trillion KRW ▲management efficiency improvements of 5.4 trillion KRW ▲revenue expansion of 1.2 trillion KRW ▲capital augmentation of 10.1 trillion KRW.

Non-core assets unrelated to the institutions' primary functions, as well as overseas business shares with low strategic value, have been targeted for sale. Additionally, business adjustments and withdrawals will be made considering business and investment priorities, alongside efforts to reduce various project expenses.

By institution, KEPCO will have the largest financial improvement scale at 14.3 trillion KRW over five years, followed by LH with 9 trillion KRW, five power generation companies with 4.8 trillion KRW, and resource public enterprises with 3.7 trillion KRW.

The Ministry of Economy and Finance expects that the debt ratio of financially at-risk institutions, which surged sharply this year, will show a clear downward trend starting next year under this financial soundness plan. The debt ratio of the 14 institutions, which soared to 345.8% this year, was initially expected to remain at the 300% level until 2026. However, with the implementation of this plan, the debt ratio is expected to improve significantly, reaching around 265% by 2026.

The debt scale is also estimated to decrease by 2.47 trillion KRW from the original forecast of 478.6 trillion KRW to approximately 453.9 trillion KRW by 2026.

The Ministry stated, "We will monitor the implementation performance of the financial soundness plans for financially at-risk institutions quarterly and continuously identify additional self-help efforts linked with the 'Public Institution Innovation Guidelines.' We will actively support institutions' financial soundness efforts by expanding management evaluation scores related to work efficiency and financial indicators and supplementing these indicators." The Ministry plans to submit the related agenda to the National Assembly by the 3rd of next month.

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