Fiscal Deficit of 103.4 Trillion Won 'Second Largest Ever'... The Nation's Treasury Running Dry

Government, Fiscal Trends August Issue

This year, the government's fiscal management balance for the first half recorded the second-largest deficit since the 2020 COVID-19 pandemic. Government spending has increased, while tax revenues have steadily declined due to decreases in corporate taxes, causing the national debt to grow rapidly.

According to the "Monthly Fiscal Trends August Issue" released by the Ministry of Economy and Finance on the 14th, the integrated fiscal balance, which is the total government revenue minus total expenditure as of the end of June this year, showed a deficit of 76 trillion won. This deficit increased by 20.5 trillion won compared to the same period last year.

The management fiscal balance, which excludes the four major social security funds such as the National Pension from the integrated fiscal balance to show the government's actual fiscal condition, recorded a deficit of 103.4 trillion won. The cumulative management fiscal balance deficit as of June is the second-largest since the monthly fiscal trend data collection began in 2020, when it was 110.5 trillion won. This is the third time the management fiscal balance deficit has exceeded 100 trillion won as of the end of June, following 2020 (110.5 trillion won) and 2022 (101.9 trillion won).

The rapid deterioration of the fiscal balance was largely due to a decrease in tax revenues such as corporate taxes caused by the economic downturn. From January to June this year, the government's total revenue was 296 trillion won, a decrease of 300 billion won compared to last year.

National tax revenue, which accounts for about 60% of total revenue, was 168.6 trillion won, down 10 trillion won from the same period last year. Accordingly, the progress rate, which is the ratio of the actual collected tax amount to the annual tax revenue target (main budget), was 45.9%, falling below half. Meanwhile, total expenditure during the same period increased by 20.3 trillion won from last year to 371.9 trillion won.

The worsening national finances led to an increase in national debt. As of the end of June, the national debt stood at 1,145.9 trillion won, an increase of 53.4 trillion won compared to the end of last year.

Meanwhile, the issuance of government bonds from January to July this year was 115.9 trillion won, which is 73.2% of the annual total issuance limit. The procurement interest rate in July fell to 3.15% from 3.30% in the previous month, and the bid rate dropped to 300% from 3210% in the previous month.

A Ministry of Economy and Finance official explained, "The July government bond interest rate fell due to increased expectations for interest rate cuts by the U.S. Federal Reserve (Fed) and the Bank of Korea, following the slowdown in U.S. inflation and the decline in international oil prices."