South Korea will finish repaying the government's share of public funds injected to prevent a collapse of the financial system during the 1997 Asian financial crisis, with next year's budget marking the final payment.
Park Hong-keun, minister of planning and budget, said at a Cabinet meeting on the 1st that the government will "complete repayment next year of the public funds injected in 1998, completing the recovery from the IMF crisis 30 years on," as he outlined the 2027 budget proposal.
The repayment being completed is separate from the International Monetary Fund bailout loans, which the country paid off in full in 2001. It covers debt tied to public funds spent restructuring the financial sector during the crisis, including support for troubled financial firms and purchases of non-performing loans. At the time, the government channeled large sums through the Korea Deposit Insurance Corporation and the Korea Asset Management Corporation to restructure financial companies.
The scope of the repayment and the principles for sharing the cost were set in 2002 under the Kim Dae-jung administration. Of about 97 trillion won in public fund debt, 28 trillion won was to be recovered through sales of stakes in financial companies and non-performing loans, while the remaining 69 trillion won was to be split between public finances and the financial sector, at 49 trillion won and 20 trillion won respectively. The repayment plan began in earnest in 2003. Financial firms have also paid a special contribution equal to 0.1% of their deposit balances.
According to the National Assembly Budget Office, the outstanding debt of the Public Fund Redemption Fund stood at 15.07 trillion won at the end of last year. The government will repay 7.15 trillion won this year and the remaining 7.92 trillion won next year, completing the repayment of public fund debt under the plan. Total repayments from 2003 through 2027 will reach 97.2 trillion won.
The Public Fund Redemption Fund will be dissolved at the end of 2027 once the remaining debt is cleared, retiring the fiscal debt left by the crisis after three decades. Some efforts to recover public funds will continue separately, however, including the Korea Deposit Insurance Corporation's stake in Seoul Guarantee Insurance.
