The International Monetary Fund (IMF) projected that Korea's general government liability (D2) will exceed 64% of gross domestic product (GDP) by 2030. General government liability is an indicator used for cross-country comparisons; it adds the liabilities of nonprofit public institutions to government debt (D1), which combines the central and local governments' debt.
The IMF forecast Korea's D2 ratio this year at 53.4%, up 3.6 percentage points from the previous year (49.8%). Among the 11 non-reserve-currency advanced economies classified by the IMF, this is the third highest after Singapore (175.6%) and Israel (69.2%).
According to the Ministry of Economy and Finance on the 16th, the IMF projected in the October issue of its Fiscal Monitor that Korea's general government liability (D2) will rise to 64.3% of GDP by 2030.
The IMF's announcement reflects the outlook for government debt (D1) in the government's '2025–2029 National Fiscal Management Plan.'
The government expected the ratio of government debt to GDP to reach 49.1% this year, 51.6% in 2026, 53.8% in 2027, 56.2% in 2028, and 58.0% in 2029.
Earlier, the IMF Korea mission team noted in its annual consultation report on 24th that "long-term fiscal reform is needed to secure fiscal sustainability while accommodating future expenditure pressures related to aging." This contrasts with the Lee Jae-myung administration's stance, which does not worry about an increase in national debt under an expansionary fiscal stance.
Regarding the IMF's assessment in its fiscal report, the Ministry of Economy and Finance said, "The government manages public finances with both the core role of fiscal policy and fiscal sustainability in mind," adding, "In the current grave economic situation, active fiscal management to support an economic recovery is unavoidable." In other words, an expansionary fiscal operation is inevitable to stimulate the economy.
The ministry continued, "To ensure fiscal sustainability, we are working to minimize government debt by reflecting the largest-ever expenditure restructuring (27 trillion won) and cleanup of tax exemptions and reductions when drafting next year's budget bill," adding, "In the second half, we will launch a 'fiscal structure innovation task force' to flesh out plans to secure fiscal sustainability across all areas, including expenditure, revenue, and social insurance."
It added, "Forecasts of liability levels can fluctuate depending on economic and fiscal conditions and the degree of policy effort. There are also countries where the liability ratio improved through policy responses such as boosting the growth rate," noting, "In its 2021 outlook, the IMF suggested that Korea's D2 in 2023 would exceed 60% of GDP, but the final result was 50.5%, a significant difference."