Lee Jae-myung Government Sees Surge in Temporary Borrowing from Bank of Korea in First Month

In the first month of President Lee Jae-myung's administration last month, it was confirmed that the government used temporary borrowing from the Bank of Korea amounting to 17.9 trillion won.

According to materials submitted by the Bank of Korea to Park Seong-hoon, a member of the National Assembly's Planning and Finance Committee from the People Power Party, the government borrowed 17.9 trillion won from the Bank of Korea during June this year.

This is similar to how ordinary citizens use an "overdraft account" to cover expenses as needed. This system, colloquially called "BOK overdraft," is used as a temporary funding method when government expenditures exceed revenue.

The frequent use of this system by the government suggests that revenue shortfalls are recurring.

Dilemma of Revenue Shortfalls and Expansionary Fiscal Policy

As of the end of the first half of this year, the cumulative loans amounted to 88.6 trillion won, a decrease of about 3% compared to the same period last year (91.6 trillion won). This is largely attributed to the absence of loans in May during the presidential election.

The government repaid all of the loan balance of 55 trillion won as of the end of April this year, but by the end of June, the newly borrowed 17.9 trillion won remained as a balance.

President Lee Jae-myung has emphasized active fiscal policies since the beginning of his term. In a National Assembly state of affairs speech on June 26, President Lee stated, "It is irresponsible for the government to remain passive and insist only on austerity during an economic crisis, which undermines the very reason for the government's existence."

However, there are concerns that if the expansionary fiscal stance is maintained in a situation where revenue shortfalls are structurally recurring, the permanent usage of BOK temporary loans may become inevitable.

Park Seong-hoon, a member of the People Power Party, criticized, "It is irresponsible that the Democratic Party, which heavily criticized BOK's temporary loans during the Yoon Suk-yeol government, immediately borrowed 18 trillion won upon taking power," adding, "We will monitor and check to prevent the Lee Jae-myung government from emptying the nation's coffers with handout-style expansionary fiscal policies."

In response, the Ministry of Strategy and Finance explained, "June is typically a month with lower revenue, and we have utilized temporary borrowing from the Bank of Korea annually," asserting, "It is unrelated to the current government's fiscal stance or annual revenue shortfalls."

They further stated, "We plan to repay the temporary borrowings after securing funds in July."

Image Sources: President Lee Jae-myung / News1, supporting materials for understanding the article / Photo=Insight