Gov't borrows $23.8 billion in temporary loans from Bank of Korea in first quarter
The government borrowed nearly 33 trillion won (US$23.8 billion) from the Bank of Korea (BOK) in temporary loans in the first quarter to fill its fiscal shortfall amid weaker-than-expected tax revenue during the period, data showed yesterday.
According to the BOK data submitted to Rep Yang Kyung-sook of the main opposition Democratic Party, the total outstanding amount of the government's temporary loans from the central bank during the January-march period amounted to 32.5 trillion won. Compared with the same period in previous years, it marked the largest amount of outstanding loan balance since 2011, when such statistics have been recorded.
It exceeds last year's first-quarter balance by 1.5 trillion won and is more than double than that of the first quarter of 2020, when the nation saw aa sudden spike in spending due to the outbreak of COVID-19.
Similar to an overdraft account for private individuals with commercial banks, the BOK'S temporary loan system for the government is utilised to address temporary funding shortages.
"During the period from January to March, tax revenues are typically not substantial, so the government tends to rely heavily on temporary borrowing from the BOK," a finance ministry official said.
The official added, "This year, there has been significant fiscal spending in the first half, which is why we borrowed money from the BOK."
In January, the finance ministry announced a plan to utilise 65 perscent of its annual budget for initiatives involving welfare, employment and social overhead capital projects in the first half of the year. The interest occurred from the temporary loans has been estimated at 638 billion won. The BOK is scheduled to receive the interest from the government in the second quarter.
According to a BOK official, the central bank and the finance ministry have agreed on supplementary terms for the loans, such as ensuring that the loan balance does not exceed the balance of government bond issuance, following criticisms last year over an increase in temporary loans by the government.