Fiscal Deficit Hits Worst at 108 Trillion... National Debt to Repay Exceeds 800 Trillion

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[Asia Economy Reporter Kwangho Lee] The deficit in the management fiscal balance, which gauges the government's financial condition, soared to 108.4 trillion won, marking the worst record in history. The national debt that the central government must repay also surpassed 800 trillion won, accelerating the deterioration of fiscal soundness. Although there are concerns about fiscal deterioration, the government insists that it needs to be viewed with a longer-term perspective and plans to manage it based on the 4th supplementary budget (management fiscal balance -118.6 trillion won, national debt 846.9 trillion won) by the end of the year.

According to the 'Monthly Fiscal Trends November Issue' published by the Ministry of Economy and Finance on the 10th, the integrated fiscal balance, which is total expenditure minus total revenue, recorded a deficit of 80.5 trillion won through September this year. During the same period, the management fiscal balance deficit, which excludes various social insurance funds from the integrated fiscal balance, was 108.4 trillion won, an increase of 57 trillion won from the previous year (51.4 trillion won). Every month this year has seen record-high deficits.

The rapid increase in the fiscal deficit is due to a decrease in total revenue but an increase in total expenditure caused by four rounds of supplementary budgets, including emergency disaster relief funds and employment insurance fund payments.

Total revenue through September was 354.4 trillion won, down 5.1 trillion won from the previous year. This decrease in total revenue was largely due to a reduction in national tax revenue, which fell by 13.4 trillion won to 214.7 trillion won.

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By national tax revenue category, corporate tax decreased by 15.8 trillion won compared to the previous year, due to reduced operating profits caused by the economic downturn from the COVID-19 pandemic. Value-added tax and customs duties also decreased by 4.3 trillion won and 1.1 trillion won, respectively.

On the other hand, income tax increased by 4.2 trillion won as comprehensive income tax and earned income tax rose compared to September of the previous year, following the early completion of earned income and child tax credit payments in August.

Although government revenue decreased, expenditure increased significantly. Total expenditure through September was 434.8 trillion won, up 48.8 trillion won from the previous year. This was due to the execution of the 4th supplementary budget, including small business new hope funds, care and learning support funds, and employment stability support funds to overcome COVID-19.

Accordingly, as of the end of September, national debt stood at 800.3 trillion won, an increase of 6.2 trillion won from the previous month.

Out of the 30.88 trillion won in early execution management projects by central ministries and public institutions this year, 25.02 trillion won (81.0% of the annual plan) was executed through September.

A Ministry of Economy and Finance official said, "Due to the monthly characteristics, the payment scale of major tax items is relatively small, and the fiscal balance deficit was recorded due to increased total expenditure such as the execution of the 4th supplementary budget. The fiscal balance and national debt are progressing according to the usual trend, and will be managed based on the 4th supplementary budget until the end of the year."

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