South Korea's central government debt climbed to KRW 1,141.2 trillion (approximately $826 billion USD) in 2024, marking an increase of KRW 48.7 trillion from the previous year. This figure was confirmed by the Board of Audit and Inspection (BAI) on May 30, as it submitted its 'National Account Settlement Audit Report' to the National Assembly, incorporating corrections to the '2024 Fiscal Year National Account Settlement Report' approved by the Cabinet last month.

Of the total debt, KRW 781.3 trillion (68.5%) comprised deficit-covering debt, which must be repaid through taxes, while KRW 359.9 trillion (31.5%) was financial debt, backed by corresponding assets. Notably, despite the absolute increase in debt, the debt-to-GDP ratio for 2024 stood at 44.8%, a 0.7 percentage point decrease from 45.5% in 2023. This relative decline suggests a robust economic performance that outpaced the growth in debt, indicating a manageable fiscal position compared to many other developed nations.

Audit Findings Highlight Enhanced Accuracy

The BAI confirmed that the 2024 fiscal year's revenue and expenditure figures, totaling KRW 535.9 trillion in revenue and KRW 529.5 trillion in expenditure, were consistent with the Ministry of Economy and Finance's (MOEF) preliminary aggregation, resulting in a KRW 2 trillion surplus. No errors were found in the overall central government debt calculation itself.

However, the audit identified a total of KRW 5.7 trillion in errors within the financial statements. Specifically, KRW 2.9 trillion in errors were found in asset accounts, KRW 100 billion in liability accounts, and KRW 2.7 trillion in financial operating results. For instance, the Ministry of Land, Infrastructure and Transport (MOLIT) had accounting errors that led to both an underestimation of KRW 2.2 trillion and an overestimation of KRW 2 trillion in social infrastructure assets. Similarly, the Defense Acquisition Program Administration (DAPA) recorded errors in long-term unpaid amounts and provisions.

Following these critical corrections, national assets were adjusted to KRW 3,218.4 trillion, a decrease of KRW 2.9 trillion from the pre-audit figure. Total national liabilities also saw a slight reduction to KRW 2,585.7 trillion, down KRW 100 billion. The financial operating results, which reflect how national finances were managed, increased from KRW 58.7 trillion to KRW 61.4 trillion after audit adjustments.

Crucially, the magnitude of errors in the 2024 financial statements, at KRW 5.7 trillion, represents about half of the KRW 10.4 trillion in errors identified in the 2023 fiscal year's report. This significant reduction underscores improving accuracy in government accounting, enhancing fiscal transparency and accountability.

Broader Fiscal Context and Future Outlook

Beyond the core financial statements, the BAI's examination of attached documents—including the State-Owned Property Management and Operation Report, the Goods Management and Operation Report, and the Total Statement of Bonds Receivable—revealed further discrepancies. State-owned property was initially understated by KRW 2,382.9 billion, goods by KRW 1.6 billion, and bonds receivable by KRW 1.5 billion. After corrections, state-owned property is now reported at KRW 1,344.5 trillion, goods at KRW 16.5 trillion, and bonds receivable at KRW 576.7 trillion.

While South Korea's debt-to-GDP ratio remains relatively low compared to the OECD average, the speed at which it has increased in recent years has been a point of concern for the government, driven by expanded welfare spending and COVID-19 related stimulus packages. The MOEF has consistently emphasized a commitment to "sound fiscal management" to address long-term challenges such as an aging population and potential future burdens.

The government is actively working on implementing new fiscal rules designed to more strictly control debt levels and improve the overall fiscal balance. These efforts are aimed at optimizing spending efficiency and ensuring financial stability to maintain national competitiveness. The improvements in auditing accuracy further support these goals by providing clearer and more reliable data for informed policymaking and bolstering public trust in the government's financial reporting.

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