South Korean government’s debt issuance jumped to an all-time high of 48.5 trillion won ($42.5 billion) in the first quarter in line with a record fiscal spending to battle alarming unemployment rate and slowing economy.

According to the Korea Financial Investment Association on Wednesday, the Korean government’s debt issuance in the first three months of this year jumped 42.3 percent from a year ago period to a record high of 48.5 trillion won, exceeding past quarterly record high of 46.4 trillion won in the second quarter of 2014.

Net debt issuance, or gross debt issuance minus repayments, totaled 34.07 trillion won, also, a historic high on a quarterly basis.

This pushed up the amount in outstanding government debt to 674.5 trillion won as of the end of the first quarter, replacing the previous record high of 660.3 trillion won at the end of the second quarter in 2018.

The sharp increase in government debt issues comes against the government’s aggressive budget spending for two consecutive years, said market experts. The Korean government is working to create another super-sized budget of 504.6 trillion won, up 7.3 percent from this year’s record budget of 469.6 trillion won, for next year to finance its campaigns for revitalizing the economy.

The government tends to ramp up debt issues in the first half of a year and then repay them through tax revenue. The figure for the first quarter this year nevertheless is still far above the previous records, noted market experts.

The experts forecast the Korean government’s debt issuance in the upcoming quarters would grow even larger amid an unfavorable outlook for tax income this year. The Korean government’s tax revenue last year exceeded the budget by 13.7 trillion won thanks to a surge in tax collected from companies, especially chip makers due to the semiconductor boom, as well as the jump in property taxes following changes in the government’s real estate policy.

Chipmakers and the country’s other major exporters that have backed up the country’s feeble economy last year reported a sharp reduction in profits, which means less tax revenue.

The country’s exports have contracted for four months in a row since December, and the country’s top chipmaker Samsung Electronics saw its operating profit for the first quarter plunge 60.4 percent from the same period last year.

The government’s strong fiscal policy was also in response to the International Monetary Fund’s recommendation to Korea earlier last month to deliver substantial new spending if it wants to meet its target of 2.6 percent growth this year. The country’s gross domestic product grew 2.7 percent in 2018, the slowest in six years. The IMF yesterday kept its estimate for Korea’s economic growth for this year unchanged at 2.6 percent.

By Chung Seok-woo and Cho Jeehyun

[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]