IMF "South Korea government debt to exceed 64% of GDP in five years"

IMF projects South Korea's general government debt at 64.3% in 2030

"South Korea, the third fastest debt rise among advanced countries"

The International Monetary Fund (IMF) has projected that South Korea's general government debt ratio will exceed 64% of gross domestic product (GDP) within the next five years.

According to the Ministry of Economy and Finance on the 16th, the IMF said in its recently released 'Fiscal Monitor, October issue' that South Korea's general government debt (D2) is expected to rise to 64.3% of GDP by 2030.

General government debt is a measure used for cross-country comparisons that adds the debts of non-profit public institutions to national debt (D1), which combines central and local government liabilities. This IMF projection reflects the government's '2025–2029 National Fiscal Management Plan' level of national debt (D1).

The government expects the national debt ratio 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. Accordingly, the IMF forecasts that South Korea's D2 ratio this year will increase to 53.4%, up 3.6% percentage points (p) from the previous year (49.8%). This is the third highest level among the 11 advanced non-major-reserve-currency countries classified by the IMF, after Singapore (175.6%) and Israel (69.2%).

The government explained the IMF projection by saying, "Given the current severe economic situation, active fiscal management to support economic recovery is unavoidable, and the IMF also assesses this government's fiscal stance as appropriate."

In last month's Article IV consultation results, the IMF also said, "Considering sufficient policy space, a negative output gap, and inflation close to target, accommodative monetary and fiscal policies are appropriate," and evaluated that "the government's short-term fiscal stance and the spending priorities in the 2026 budget are appropriate."

The Ministry of Economy and Finance said it will carry out the largest-ever expenditure restructuring (27 trillion won) in next year's budget and reflect the streamlining of tax exemptions and reductions to secure fiscal sustainability.

Also, following the IMF's recommendation that structural reforms are needed to secure long-term fiscal capacity, last month the 'Fiscal Structure Innovation TF' chaired by Deputy Minister Im Gi-geun of the Ministry of Economy and Finance was launched to prepare innovation plans in five areas: expenditure, revenue, social insurance, fiscal management, and the national treasury.

A ministry official added, "The debt levels in the National Fiscal Management Plan used by the IMF are an interlinked plan that is revised annually," and said, "There are overseas examples, such as the Netherlands and Portugal, that improved debt ratios through policy responses like boosting growth."

Yu Ji-hee, Hankyung.com reporter keephee@hankyung.com