In an interview with Segye Ilbo on the 8th, presidential candidate Lee Jae-myung of the Democratic Party of Korea increased fiscal spending, saying, "The International Monetary Fund (IMF) even recommended keeping it within 85% of the government bond ratio." emphasized the need for
Candidate Lee added, "I said this because the IMF was too frustrated." He added, "We need to increase fiscal spending. We need to keep the (government bond ratio) at 85%."
Based on this remark alone, it can be read that the IMF suggested the appropriate level of the national debt-to-GDP ratio to the Korean government as 85% of gross domestic product (GDP).
In an interview with JoongAng Ilbo last month, Candidate Lee also said, "In the past, the IMF recommended that Korea keep the government debt ratio within 85%." It was," he said.
Did the IMF actually recommend that Korea's national debt ratio be 85%?
The candidate did not comment on when or in what form the IMF recommended it.
However, as a result of checking with Lee's camp, the basis for Lee's remarks is the report of the 2017 annual consultation between the IMF and the Korean government.
The annual consultation is a meeting in which the IMF inspects the overall economy of member countries, including macroeconomic, fiscal, and financial, every year.
Spending on pensions and health care is projected to rise by 10-16% of GDP by 2060.
If revenues remain constant, the debt-to-GDP ratio will be on an unsustainable trajectory and will exceed 100% of GDP by 2050, suggesting that fiscal sustainability can be maintained if revenues increase.
The report referred to measures to keep the debt-to-GDP ratio below 'dangerous' levels, writing this level at 85% of GDP in developed countries.
He also said that this is far exceeding the 45% upper limit of GDP submitted to the National Assembly.
Despite additional spending on social safety nets, childcare benefits and active labor market policies (ALMPs), long-term growth in revenues could stabilize the national debt-to-GDP ratio below 85%, the IMF said.
Candidate Lee appears to have cited the 85% mentioned here as the ratio of government bonds recommended by the IMF to the Korean government.
In the 'Selected Issues' report released in February 2018 based on the results of the annual consultation, the IMF presented 85% as the standard for developed countries.
According to the report, the IMF expects public debt as a percentage of GDP to peak at 51% in 2061 and decline thereafter, assuming that authorities choose to follow a 'temporary deficit' scenario with additional fiscal measures to stimulate social protection and labor supply and demand. predicted.
Instead, if the authorities follow the 'permanent deficit' scenario, the public debt-to-GDP ratio will reach 70% in 2080 and stabilize to 75% after 2100.
The International Monetary Fund (IMF) said, "This level will still be below the 85% standard for developed countries."
Regarding this, an official from the Ministry of Strategy and Finance said, "It means that Korea is better than the 85% standard for advanced countries.
The International Monetary Fund (IMF) reported in March last year that "there is no single estimate of the appropriate level of debt that an advanced economy such as Korea should have." %, and 60% for emerging countries.”
However, the opinion of this candidate is different.
Choi Bae-geun, a professor of economics at Konkuk University close to Lee, said in a phone call with Yonhap News, "The IMF report (referenced by Lee) is a report that deals with the results of annual consultations with Korea, and since Korea is already classified as a developed country, the figure is 85%. It should be viewed as a recommendation for Korea,” he said.
An official from the candidate camp said, "When it comes to providing disaster aid, the frame is always stuck in Korea's 'how much debt, a lot of government bonds'. It is an example of an international organization (IMF) talking about bold investment in finance."
Currently, Korea's national debt-to-GDP ratio is 50.1% (based on supplementary budget).