|Candidate Chang-yong Lee for the governor of the Bank of Korea answers questions from reporters as he arrives at the personnel hearing office at the Buyeong Taepyeong Building in Jung-gu, Seoul on the morning of the 1st. 2022.4.1/News 1 © News1 Photo Foundation|
Candidate Chang-yong Lee for the governor of the Bank of Korea emphasized that “there is a need to manage government debt more strictly,” while predicting that the national debt will increase rapidly due to the rapid aging of the country.
Candidate Lee gave such a written answer to a question asked by Rep. Bae Jun-young of People’s Power, a member of the National Assembly, on how to respond to the surge in national debt ahead of the personnel hearing of the National Assembly Planning and Finance Committee to be held on the 19th.
Candidate Lee said, “The recent increase in national debt is mainly attributed to the unavoidable expansion of fiscal spending in response to the COVID-19 crisis. “I am concerned that debt is expected to rise rapidly,” he said.
He continued, “For fiscal soundness management, we need to strengthen the effectiveness of both expenditure and financing. want to do it,” he said.
Assemblyman Bae also asked about the appropriate level of the government bond-to-GDP ratio.
In response, Candidate Lee said, “In the past, it was considered desirable to manage the national debt ratio below 60% in developed countries and 50% in emerging countries. At least in developed countries, these standards have become obsolete.”
In addition, “Korea’s current level of national debt-to-GDP ratio is low compared to major countries, so it is not in a situation to be in immediate danger in the short term, but in the medium term, it is expected that welfare fiscal expenditure related to pension and medical expenses will increase significantly due to the rapid low fertility and aging population. “In addition, the won is not an internationalized currency compared to the dollar, so it is necessary to consider that an excessive increase in national debt may negatively affect the national credit rating,” he said.
He also expressed his view that “it is necessary to manage government debt more strictly while paying attention to these characteristics of our country.”
Democratic Party lawmaker Park Hong-geun asked about Lee’s position on the need to introduce fiscal rules emphasized by Choo Kyung-ho, who was nominated as deputy prime minister for economy.
Candidate Lee said, “In a situation in which welfare fiscal expenditure related to pension and medical expenses is expected to increase significantly due to the rapid low birth rate and aging population, the introduction of fiscal rules will greatly contribute to managing the national debt at a sustainable level in response to these fiscal risks. ‘ he replied. Candidate Lee continued, “As the International Monetary Fund (IMF) suggested, for an effective rule to be effective, it must be ① simple and ② legally enforceable, and in times of crisis ③ flexibility to operate fiscal policy at its discretion. (Flexibility) also needs to be considered.”