[News Terms] Government Borrowed Overdraft ‘Daejeongbu Ilsi Daechulgeum’

Temporary government loans are a system in which the government borrows money from the Bank of Korea to resolve temporary cash shortages. This system is established based on Article 75 of the Bank of Korea Act and Article 32 of the National Treasury Management Act, and is similar in structure to an individual opening a negative bank account and using and repaying money as needed, thus it is also called the "government's negative account."

According to Article 32 of the National Treasury Management Act, when the government faces a fiscal shortage, it can raise funds by issuing treasury bonds or through temporary borrowing from the Bank of Korea. Treasury bonds are short-term government bonds with maturities of less than one year, and each issuance requires a bidding announcement, which is cumbersome. On the other hand, temporary loans can be executed quickly within the limits set by the National Assembly after the Monetary Policy Committee confirms the loan interest and ancillary conditions. This year, the limit for temporary loans is up to 50 trillion won, including ▲40 trillion won for the integrated account ▲2 trillion won for the Grain Management Special Account ▲8 trillion won for the Public Fund Management Fund.

However, since temporary borrowing involves the Bank of Korea issuing money to raise funds, it can increase market liquidity, which is problematic. In severe cases, it can cause distortions in the money supply and act as inflationary pressure. There is also a significant concern about undermining the independence of the central bank. The Bank of Korea manages temporary borrowing by specifying ancillary conditions precisely because of these concerns. According to the "2024 Temporary Government Loan Limit and Loan Conditions" approved by the Monetary Policy Committee in January, the committee newly added the phrase in the ancillary conditions that "the government must manage so that the average balance of temporary borrowing does not exceed the average balance of treasury bonds." This means that when temporary funding shortages occur, treasury bonds should be utilized before temporary borrowing. Additionally, the phrase "the government must strive to minimize the average borrowing days and cumulative borrowing amount" was added to encourage reducing borrowing itself.

Meanwhile, as of the end of March this year, the total outstanding balance of temporary loans borrowed by the government from the Bank of Korea and not yet repaid is 32.5 trillion won. This is the largest temporary loan amount since statistics have been available starting in 2011. It is 1.5 trillion won more than the balance of 31 trillion won in the first quarter of last year.