Fiscal Deficit Hits 83 Trillion This Year, Third Largest Ever... National Debt Approaches 1,160 Trillion

Ministry of Economy and Finance, September Fiscal Trends

As of July this year, the national budget deficit reached 83.2 trillion won, marking the third-largest deficit on record as of the end of July. National debt increased by 13.4 trillion won in just one month, approaching 1,160 trillion won.

50,000 won bill (Photo by Yonhap News)

According to the September issue of the Fiscal Trend report published by the Ministry of Economy and Finance on the 12th, total revenue from January to July this year was 357.2 trillion won, an increase of 3.9 trillion won compared to the previous year. Among this, national tax revenue was 208.8 trillion won, down 8.8 trillion won from the same period last year. Although value-added tax and income tax increased by 6.2 trillion won and 1 trillion won respectively due to rising payment performance, corporate tax revenue sharply declined by 15.5 trillion won due to worsening corporate earnings.

During the same period, non-tax revenue increased by 1.1 trillion won to 18.4 trillion won. On the other hand, fund revenue decreased by 2.5 trillion won to 127.2 trillion won. Kim Wansu, Director of Fiscal Soundness at the Ministry of Economy and Finance, explained, "The increase in non-tax revenue is due to the inflow of proceeds from asset sales related to the relocation of the Korea Rural Community Corporation headquarters into the national treasury."

Despite the deterioration in national tax revenue causing total revenue to increase only slightly, total expenditure rose more rapidly. Total expenditure from January to July this year was 409.5 trillion won, an increase of 18.3 trillion won compared to the previous year. Budget spending increased by 13.3 trillion won due to support for health insurance subscribers, and fund expenditure also rose by 5.3 trillion won due to increased retirement benefit payments.

As expenditure exceeded revenue, the integrated fiscal balance recorded a deficit of 52.3 trillion won. After deducting the four major social security funds including the National Pension from the integrated fiscal balance to show the government's actual fiscal condition, the management fiscal balance showed a deficit of 83.2 trillion won. This is the third-highest figure on a cumulative basis as of July since the monthly management fiscal balance statistics began in 2014, following 2014 (-86.8 trillion won) and 2020 (-98.1 trillion won). The deficit also widened by 15.3 trillion won compared to the same period last year.

Central government debt accumulated up to July reached 1,159.3 trillion won, an increase of 13.4 trillion won from the end of the previous month. Director Kim stated, "As of the end of July, national debt recorded the largest scale ever both on a monthly and annual basis," explaining that it is showing an increasing trend in line with the expansion of the economy. Compared to the end of last year, the balance of government bonds increased by 68.2 trillion won, the balance of foreign exchange stabilization bonds increased by 3 billion won, but the balance of national housing bonds decreased by 1.7 trillion won. The issuance volume of government bonds in August was 11.8 trillion won (10.5 trillion won based on competitive bidding).

The issuance volume of government bonds from January to August this year was 127.7 trillion won, which is 80.6% of the annual total issuance limit. The procurement interest rate in August was 2.89%, down from 3.15% in the previous month, while the bid rate rose to 312% from 300% the previous month.

The Ministry of Economy and Finance said, "The interest rate on government bonds in August fell for short-term bonds due to the easing of geopolitical tensions in the Middle East and remarks by Jerome Powell, Chairman of the U.S. Federal Reserve (Fed), hinting at a rate cut, raising expectations for a big cut (0.5 percentage point cut). However, long-term bond interest rates rose due to concerns over supply and demand burdens caused by the expansion of next year's government bond issuance volume."