Seoul seeking legal cap on debt to GDP ratio as fiscal deficit already nears $80 bn in June

South Korea will seek to legally bind the government to manage liabilities under 60 percent of the gross domestic product (GDP) to contain debt and fiscal deficit that has already exceeded 100 trillion won ($75.8 billion) as of June as expenditures continue to outrun revenue.

According to the August financial trends report released by the Ministry of Economy and Finance on Thursday, the nation¡¯s managed fiscal balance deficit stood at 101.9 trillion won on a cumulative basis for the January-June period, surging by 22.2 trillion won from a year earlier.

The government estimated managed fiscal deficit to be around 110.8 trillion won by the end of the year when it packaged the second supplementary budget.

The consolidated fiscal deficit for the first six months of the year came to 75 trillion won, up 27.8 trillion won from a year ago and 26.1 trillion won from the previous month.

Fiscal deficit shot up due to supplementary spending, but the government aims to manage deficit so that it does not exceed over full-year goal of 110.8 trillion won, the finance ministry said.

Deputy prime minister and finance minister Choo Kyung-ho said on Thursday that the government was packaging a bill for public finance mandate, forcing the government to manage debt within 60 percent of the GDP for the mid to long term period by controlling deficit-covering debt issues.

By June, tax revenue came to 334.4 trillion won, up 35.8 trillion won from the previous year.

Tax revenue totaled 218.2 trillion won, adding 36.5 trillion won on year while non-tax revenue reached 18.6 trillion won, up 22 trillion won from last year.

Income from public fund investment operations came to 97.4 trillion won, down by 3 trillion won from a year earlier.

Spending still exceeded revenue as fiscal spending surged by 63.6 trillion won to 409.4 trillion won.

Public fund spending increased by 35.2 trillion won to 140.2 trillion won due to funds in compensation for small business owners. Out of the 38 trillion won set aside for businesses under supplementary budget management, 32.1 trillion won were spent during May and June.

The country¡¯s national liabilities totaled 1,007.5 trillion won at the end of July, down 11.2 trillion won from 1,018.8 trillion won at the end of June as the government bonds repaid upon reaching maturity outpaced those issued.

The government is forecasting the national debt to reach 1,037.7 trillion won by the end of the year.

Government issues in the January-July period totaled 120.1 trillion won, reaching 67.7 percent of the annual ceiling for bond issuance.

Foreigners continued their net inflows for treasury bonds for the 40th consecutive month with 3.5 trillion won in July. At the end of July, the outstanding balance of treasury bonds amounted to 185.6 trillion won, making up 20.1 percent of total treasury bonds, the first time that foreigner-owned treasury bonds surpassed 20 percent at the end of a month.

[¨Ï Maeil Business Newspaper & mk.co.kr, All rights reserved]