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Korea's national debt reaches new high, prompting domestic fiscal health concerns

Published: 06 Apr. 2026, 19:01 Updated: 07 Apr. 2026, 10:01

Shoppers look at instant noodles at a supermarket in Seoul on April 3. [YONHAP]

Korea's national debt topped 1.3 quadrillion won ($86 billion) in 2025 for the first time, raising concerns over domestic fiscal health.

The nation's debt rose by 130 trillion won in just a year, while the managed fiscal balance deficit also exceeded 100 trillion won for two years in a row.

The government reviewed and approved the “2025 fiscal year settlement report” (translated) at a Cabinet meeting on Monday.

Total national revenue in 2025 came to 637.4 trillion won and total spending was 684.1 trillion won. The consolidated fiscal balance — total revenue minus total spending — showed a deficit of 46.7 trillion won, while the managed fiscal balance posted a deficit of 104.2 trillion won.

The managed fiscal balance deficit was the fourth largest on record and it was the first time the figure has stayed in the 100 trillion won range for two consecutive years. The managed fiscal balance reflects the government’s effective fiscal position by subtracting four social security funds, including the National Pension Service (NPS), from the consolidated fiscal balance.

The managed fiscal balance deficit amounted to 3.9 percent of GDP. While the numbers improved from the 4.1 percent deficit recorded in 2024, it is largely attributed to the slightly higher nominal GDP and a higher dollar-won exchange rate.

Even though national tax revenue in 2025 rose by 37.4 trillion won from a year earlier on improved corporate earnings, the deficit ratio stayed similar to 2024, indicating spending also increased sharply.

“Domestic and external shocks hit at the same time, including weaker domestic demand following the fallout from martial law and rapid changes in the U.S.-driven trade environment, and there was a policy decision that fiscal policy needed to play a role through two supplementary budgets,” said Hwang Soon-kwan, treasury director-general at the Ministry of Economy and Finance.

The managed fiscal balance deficit ratio, which had typically been kept within 2 percent, has exceeded 3 percent for six consecutive years since 2020. A fiscal rule intended to cap the managed fiscal balance deficit within 3 percent of GDP has effectively become nominal.

“The fiscal rule is not in a condition where it can be realistically discussed,” a ministry official said, “The government will actively participate in National Assembly deliberations.”

National debt for the central and local governments was tallied at 1.31 quadrillion won in 2025, up 129.4 trillion won from 1.18 quadrillion won in 2024. Central government debt stood at 1.27 quadrillion won, up 127.0 trillion won from a year earlier, largely because the outstanding balance of government bonds rose by 113.5 trillion won. Per capita national debt was estimated at about 25.24 million won.

The won weakened 1.1 won from the previous session to trade at 1,506.3 won against the dollar at 3:30 p.m. on April 6. The closing values of the Kospi and Kosdaq indexes are displayed on screens in Hana Bank's trading room in central Seoul. [NEWS1]

The national debt-to-GDP ratio rose to 49.0 percent in 2025 from 46.0 percent in 2024, up 3.0 percentage points. National debt, which stayed in the 600-trillion-won range from 2016 to 2018, surged during the Covid-19 pandemic to 846.6 trillion won in 2020 and 970.7 trillion won in 2021. It topped 1 quadrillion won for the first time in 2022 and has continued to rise by nearly 100 trillion won a year.

The government expects the debt-to-GDP ratio to climb to 51.6 percent this year based on the original budget.

The government’s financial statements, however, showed improvement. National assets stood at 3.58 quadrillion won and national liabilities came to 2.77 quadrillion won in 2025. The liabilities figure, which includes contingent liabilities, is broader than the national debt measure.

Net assets increased by 179.7 trillion won from a year earlier as the rise in assets, at 365.6 trillion won, outpaced the increase in liabilities, at 185.9 trillion won. The NPS played a major role as its annual return reached a record 18.8 percent, pushing its financial assets up by 244.4 trillion won.

Apartment in Yongsan District, central Seoul on April 2 [NEWS1]

The government said it has generally managed public finances well despite higher spending to respond to economic conditions, but concerns persist about the pace of debt growth.

Korea’s general government debt, also known as D2, is projected at 56.7 percent of GDP this year, ranking 19th among 37 countries classified as advanced economies by the International Monetary Fund, according the National Assembly Budget Office. That remains below the advanced economy average of 108.5 percent, but the rise has been steep.

Korea’s D2 to GDP ratio is expected to increase by 10.8 percentage points between 2020 and 2026, making it the fifth fastest increase after Singapore, Finland and several others. Over the same period, the ratio fell by 31.6 percentage points in Japan, 3.8 percentage points in the United States and 2.0 percentage points in Germany.

“Given recent situations like wars, higher spending is unavoidable, but it is unfortunate that even the minimum discussion needed to ensure fiscal soundness has gone missing,” said Hong Sok-cheol, a professor of economics at Seoul National University. “If you also consider certain future spending increases such as rapid aging, we need to start thinking now about the next generation.”

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.
BY JANG WON-SEOK [[email protected]]