By Jun Ji-hye
The government borrowed a record 173 trillion won ($117.5 billion) through the Bank of Korea’s (BOK) short-term lending system last year mainly to cover a tax revenue shortfall, Rep. Lim Kwang-hyun from the main opposition Democratic Party of Korea said Wednesday.
The figure represents a 47 percent surge compared to the previous record set in 2023.
The BOK data submitted to the lawmaker showed that the annual cumulative loans extended to the government surged from 36.5 trillion won in 2019 to 102.9 trillion won in 2020.
The figure then decreased to 7.6 trillion won in 2021 and 34.2 trillion won in 2022 before spiking again to 117.6 trillion won in 2023.
In particular, the government borrowed 15.4 trillion won in 10 separate instances in October of last year, followed by an additional 5 trillion won in the last two days of 2024.
Compared to past precedents, short-term borrowing during the year-end months is considered unusual, reflecting the severity of the government’s tax revenue shortfall.
The interest accrued from last year’s cumulative loan totaled 209.2 billion won. This significantly exceeds the annual interest amount of 150.6 billion won in 2023, setting a new all-time high.
The central bank’s short-term lending system for the government is a mechanism used to address temporary funding shortages caused by timing gaps between revenue collection and expenditures during the fiscal year.
Therefore, increased reliance on short-term loans indicates that the government frequently resorts to temporary measures to cover funding gaps due to insufficient tax revenues relative to its spending needs.
During a parliamentary session last July, when concerns over the government’s frequent borrowing came to the fore, BOK Gov. Rhee Chang-yong vowed to implement measures to ensure that short-term loans are not used as a persistent financing method.
However, the latest data indicates that the trend has not changed since then.
“The government’s borrowing from the BOK has become a persistent means of large-scale financing due to tax cut policies and economic slowdown,” Lim said.
“The increase in short-term borrowing caused by a two-year tax revenue shortfall of 86 trillion won has expanded the money supply, driving inflation and resulting in over 200 billion won in interest costs. Urgent fiscal policy measures are needed to address this issue.”
