SEOUL – South Korea said it will tighten government spending to slow an increase in its debt and keep the debt-to-GDP ratio at mid-50% by 2027, following years of massive stimulus measures that have weakened the country’s fiscal situation.
Its finance ministry said that the government will cut the ratio of fiscal deficit to GDP to a pre-pandemic level of 3% or lower from about 5% estimated for this year, as it released the new administration’s fiscal policy plan on Thursday.
The government will normalise COVID-19-related expenditures, sell off unnecessary assets held by public enterprises, manage its employment quota and salary plans more strictly, among other measures, according to the plan.
South Korea’s debt-to-GDP ratio increased to 50% this year from 36% in 2017 as the country launched various stimulus measures, such as cash hand-outs, to boost the economy’s recovery from the pandemic.
The ministry said it will prepare a new fiscal rule based on the plan by early September and put it into effect as soon as the legislation process is complete.
(Reporting by Jihoon Lee; Editing by Muralikumar Anantharaman)
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