Interpretations of South Korea national debt are diverging between the International Monetary Fund (IMF) and the Blue House. After the IMF warned of a rapid rise in Korea’s debt ratio, Blue House Senior Presidential Secretary for Policy Kim Yong-beom countered, calling it an ‘exaggerated interpretation’. Korea’s fiscal indicators are sound, but differences over future fiscal space depending on aging and growth rates are coming to the fore, akin to a debate over whether the ‘glass is half full or half empty’.

Some argue that questions such as ‘What is fiscal soundness for?’ and ‘How much growth can be achieved through fiscal policy?’ are more important than simple headline figures. They contend that the frame of the debate should shift to how to use public finances to resolve national challenges such as polarization, the depopulation of local regions, and investment in future industries.

On the 14th, in its ‘Fiscal Monitor’ report, the IMF identified South Korea, along with Belgium, as a country whose public-debt ratio could “increase substantially.” It projected Korea’s general government debt-to-GDP ratio (D2) to rise from 54.4% this year to 63% by 2031. General government debt, which includes the liabilities of central and local governments as well as non-profit public institutions, is used for cross-country comparisons.

On the 19th, Kim wrote on Facebook, “Debates over the national-debt ratio are often exaggerated or simplified by political framing rather than grounded in the numbers themselves.”

Indeed, Korea’s general government debt ratio this year (54.4%) is roughly half the world average (95.3%) and the advanced-economy average (108.2%). It is lower than Japan (204.4%) and Canada (110.7%), and even below Germany (64.6%), which has strict fiscal rules.

The quality of the debt is also relatively sound. On the same day, Blue House Fiscal Planning Aide Ryu Deok-hyun wrote on Facebook that about 30% of Korea public debt is ‘financial debt’ backed by offsetting assets such as foreign reserves or loan repayments, and that interest payments on government bonds amount to about 1% of GDP, a level that is sufficiently manageable.

However, debate remains over the comparative baseline. The picture changes when comparing only non-reserve-currency countries. Korea’s debt-to-GDP ratio this year (54.4%) is lower than the 11-country average (54.7%) for non-reserve-currency advanced economies as classified by the IMF, but next year (56.6%) it is projected to exceed their average (55.0%).

Kim, however, cited the so-called ‘Truss moment’ after the U.K. government under Liz Truss announced tax cuts, which roiled financial markets, noting, “Even the United Kingdom, a reserve-currency issuer, saw government bond yields surge and the pound plunge when it lost market trust.” He argued that reserve-currency status is not the decisive criterion that determines fiscal soundness. “In the end, markets assess growth prospects, fiscal management capacity, political stability, and the will to pursue structural reforms alongside the currency,” he said.

A notable factor is the rapid pace of aging in Korea. The IMF warned that Korea’s mandatory spending as a share of GDP could swell to 30~35% by 2050, roughly double today’s level. In its ‘2025~2072 Long-Term Fiscal Outlook,’ the National Assembly Budget Office also projected that if current trends persist, the ratio of total revenue to GDP will decline from 24.5% in 2025 to 22.0% in 2072, while total expenditure will rise from 25.5% to 33.6% over the same period due to increased welfare spending driven by aging.

There are also calls to refocus the fiscal-soundness debate. Rather than being fixated solely on the simple debt-ratio figure, the argument is that if fiscal policy is used to raise the growth rate, the debt ratio could ultimately decline. Kim said, “If GDP grows and borrowing needs fall, the debt ratio can remain within a sufficiently manageable range.”

Minister of Planning and Budget Park Hong-Geun also said at a press briefing at the Government Complex Sejong on the 21st, “Sweden and the Netherlands chose a structure that lowers the debt ratio by boosting growth,” adding, “What matters is how to establish a ‘virtuous fiscal cycle’ that properly invests public finances to spur economic growth and expand tax revenues.”

However, there are concerns that if the optimistic scenario of growth driven by fiscal spending is not realized, the increased public-debt burden could be shouldered by future generations.

Academics also point to the limitations of relying on the single indicator of the debt-to-GDP ratio. In a January report titled ‘Why care about the debt-to-GDP ratio,’ researchers at the National Bureau of Economic Research, a U.S. nonprofit, argued that the debt-to-GDP ratio can be an arbitrary benchmark. The researchers wrote, “Argentina, with a debt ratio around 40%, experienced a crisis, whereas Japan, at about 250%, did not, which is difficult to explain using only the debt-to-GDP metric,” proposing that other indicators such as interest costs relative to GDP or debt relative to equity be considered alongside it.