government debt management in korea
DESCRIPTION
Haeyoung WooTRANSCRIPT
Government Debt Government Debt Management in KoreaManagement in Korea
Government Debt Government Debt Management in KoreaManagement in Korea
Asian Regional Public Debt Management Forum, Phuket
March 16-18, 2011
Asian Regional Public Debt Management Forum, Phuket
March 16-18, 2011
Ministry of Strategy and Finance
Republic of Korea
2011 Government Debt Management Plan
Debt Management System
Overview of Government Debt
3
Overview of Government Debt
4
Overview of Government Debt
1. Debt Level
As of 2010As of 2010
2010: KRW 400.4tr (34.7% of GDP)
• increased after the 1997–1998 Asian financial crisis and the 2008 global financial crisis
2010: KRW 400.4tr (34.7% of GDP)
• increased after the 1997–1998 Asian financial crisis and the 2008 global financial crisis
2014 Outlook2014 Outlook
Government debt-to-GDP ratio to be reduced to31% by 2014Government debt-to-GDP ratio to be reduced to31% by 2014
Government Debt (1990–2010) Government Debt (1990–2010) Government Debt (2011–2014) Government Debt (2011–2014)
420
430
440
450
460
470
480
490
500
2011 2012 2013 2014
(KRW tril)
25
27
29
31
33
35
37Gov't debt % of GDP
0
50
100
150
200
250
300
350
400
450
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
(KRW tril)
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
Gov't debt % of GDP
ⅠⅠⅠⅠ
5
Overview of Government DebtⅠⅠⅠⅠ
2. Debt Composition
Marketable debt (KTBs) made up 94% of total debt in 2010–Borrowings decreased
Marketable debt (KTBs) made up 94% of total debt in 2010–Borrowings decreased
KTB issuances increased as a part of economic restructuring after the Asian financial crisisKTB issuances increased as a part of economic restructuring after the Asian financial crisis
Marketable Debt vs Non-Marketable DebtMarketable Debt vs Non-Marketable Debt
400.4(100)
19.0(4.7)
3.3(0.8)
5.4(1.3)
374.5(93.5)
381.4(95.3)2010
122.1(100)
9(7.4)
2.8(2.3)
22.5(18.4)
87.8(71.9)
113.1(92.6)2001
Contract AuthorizationBorrowingsKTB
TotalNet Debt of Local
Goct
Non-MarketableMarketableCentral
Govt
* Outstanding amounts: KRW25tr (1996) → KRW310tr (2010) * Outstanding amounts: KRW25tr (1996) → KRW310tr (2010)
6
Overview of Government DebtⅠⅠⅠⅠ
3. International Comparison
Government debt levels and growth are relatively low and slowGovernment debt levels and growth are relatively low and slow
Comparison of Government Debt Size and GrowthComparison of Government Debt Size and Growth
Size (as % of GDP): Korea 36.1, OECD 96.9, G20 76.1Size (as % of GDP): Korea 36.1, OECD 96.9, G20 76.1
Growth (2006–2010): Korea 8%pts, OECD 20.6%pts Growth (2006–2010): Korea 8%pts, OECD 20.6%pts
% of GDP
92.8
81.3 79.9
92.4
36.1
20
30
40
50
60
70
80
90
100
US UK GER FRA KOR
G20 average : 76.1%
OECD average: 96.9%
OECD Economic Outlook (Oct 2010)
7
2011 Government Debt Management Plan
8
Government Debt Management Plan (1) - GoalsⅡⅡⅡⅡ
GoalsGoals
Total debt management
Financial risk management
Fiscal risk management
• Fiscal sustainability
• Stable gov’t financing
• Minimization of medium- and long-term cost
• Effective KTB market
Management Plan for 2010–2014*Management Plan for 2010–2014*
Promoted transparent and sound fiscal stance and secured public trust
Presented medium-term outlook for government debt and redemption plans
→ Established effective debt management system
* Announced in 2010
Promoted transparent and sound fiscal stance and secured public trust
Presented medium-term outlook for government debt and redemption plans
→ Established effective debt management system
* Announced in 2010
9
Targeting 30% Debt-to-GDP Ratio in 2014
Government Debt Management Plan (2) – Debt Level Management
ⅡⅡⅡⅡ
Fiscal BalanceFiscal Balance Expanding tax revenue base
- ‘Low tax rates and broad tax base’
- Zero base system on tax-free and exemption
Promoting productive expenditures - 10% y-y budget cuts for projects that failed to meet expectations
Expanding tax revenue base
- ‘Low tax rates and broad tax base’
- Zero base system on tax-free and exemption
Promoting productive expenditures - 10% y-y budget cuts for projects that failed to meet expectations
Enhancing ManagementEnhancing Management Gov’t debt categorized based on asset counterpart or redemption resources Gov’t debt categorized based on asset counterpart or redemption resources
- Deficit debt (Taxpayers are the resource for repayment ): Reduce by more than 50% by 2013
- Financial debt: Minimize additional financing by enhancing asset-counterpart management
- Deficit debt (Taxpayers are the resource for repayment ): Reduce by more than 50% by 2013
- Financial debt: Minimize additional financing by enhancing asset-counterpart management
<Debt Projection, by Type>
(KRWt) 2010 2011 2012 2013 2014
Deficit (%) 200 (50) 221 (50.6) 236.5 (50.5) 242.4 (49.9) 238.7 (48.5)
Financial (%) 200.3 (50) 215.8 (49.4) 231.6 (49.5) 243.3 (50.1) 253.5 (51.5)
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Government Debt Management Plan (3) - Fiscal Risk Management
ⅡⅡⅡⅡ
Achieving Fiscal Soundness
Fiscal Management System Overhaul
Fiscal Management System Overhaul
Long-term outlook (2011)
–Analysis of risk factors
–2050 outlook focuses on major fields expected to need more funding
Long-term outlook (2011)
–Analysis of risk factors
–2050 outlook focuses on major fields expected to need more funding
Bolstering Fiscal Regulations
Bolstering Fiscal Regulations
Introduction of rules to keep total expenditures 2-3% less than total revenue
– To be implemented until the Government achieves 2013–2014 goal of fiscal balance
Introduction of rules to keep total expenditures 2-3% less than total revenue
– To be implemented until the Government achieves 2013–2014 goal of fiscal balance
Fiscal statistics overhauled to meet international standards
– Accrual basis accounting applied from FY2011, according to IMF GFS standards
Fiscal statistics overhauled to meet international standards
– Accrual basis accounting applied from FY2011, according to IMF GFS standards
11
Effective Management of KTB Market
Government Debt Management Plan (4) - Financial Risk Management
ⅡⅡⅡⅡ
Effective KTB market with abundant liquidityEffective KTB market with abundant liquidity
Stable KTB issuancesMinimize Market,
Refinancing, and
Credit Risk
12
Debt Management System
13
Debt Management System (1)
1. Sovereign Asset Liability Management System (SALMS)
Ⅲ
Background· Increasing need for government debt management in the post-crisis
∙ Debt risk management system using WB borrowing funds
(March 2000)
· Increasing need for government debt management in the post-crisis
∙ Debt risk management system using WB borrowing funds
(March 2000)
Use
Limits
· Manage Korean won-denominated and foreign currency debt
· Project interest rates and optimal proportions by maturity
· Manage Korean won-denominated and foreign currency debt
· Project interest rates and optimal proportions by maturity
· Practical gap between reality and model
- Number of constraints makes it difficult to conduct a simulation
(buybacks, conversion, target duration, etc.)
- Impossible to introduce new scheme, such as KTBi
· Practical gap between reality and model
- Number of constraints makes it difficult to conduct a simulation
(buybacks, conversion, target duration, etc.)
- Impossible to introduce new scheme, such as KTBi
14
Debt Management System (2)
2. Korea Treasury Bond Issuance Management System (KIMS)
KIMS established to address SALMS limits and comprehensively
manage KTB issuances
KIMS established to address SALMS limits and comprehensively
manage KTB issuances
Ⅲ
KTB Issuance SimulationKTB Issuance Simulation
- Optimal issue proportions by maturity/type estimated using market data
(considering cost-risk tradeoff)
- Introduced in 2011 → Reduces average issuing costs by 4.9%
- Optimal issue proportions by maturity/type estimated using market data
(considering cost-risk tradeoff)
- Introduced in 2011 → Reduces average issuing costs by 4.9%
Database Infrastructure Database Infrastructure
- Systematic management ensured by storing specific information in database- Systematic management ensured by storing specific information in database
Bidding Management Bidding Management
- Systematic bidding linkage between BOK-Wire and MOSF dBrain established - Systematic bidding linkage between BOK-Wire and MOSF dBrain established
15
Debt Management System (3)
3. Korean Fiscal Information Management System
Ⅲ
System NameSystem Name
Digital Budget & Accounting System, or “dBrain”
1) Improve input efficiency & control-oriented fiscal management system
One year/accounting · fund-oriented → medium & long-term/integrated · finance-oriented
Input and control-oriented → performance-oriented
Integrated information system to cover nation’s fiscal activitiesIntegrated information system to cover nation’s fiscal activities
Integration of central government fiscal information management system that was operated separately with budgeting and accounting
Connected fiscal management between central and local government finance
2) Establishment of integrated fiscal information management system
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Debt Management System (4)
3. National Accrual Basis Accounting
Ⅲ
Advanced fiscal management system increases trust and availability of national fiscal information
Establish accounting infrastructureEstablish accounting infrastructure
Enhance accounting capacity and expertise in the government Foster a pool of experts specializing in government accounting
Overhaul accounting management systemOverhaul accounting management systemFiscal analysis method development using accrual F/S,
Considering accounting methods of provision liability for pensions
National Accounting Standards Center established
National Accounting Certificate System introduced
Introduced to facilitate fiscal management by calculating national net assets from FY09
Mapped out 3-year plan for advanced national accounting system in 2010
Introduced to facilitate fiscal management by calculating national net assets from FY09
Mapped out 3-year plan for advanced national accounting system in 2010
Thank youThank you Thank youThank you
Hae-Young Woo ([email protected])
Director, Government Bond Policy Division
of Treasury Bureau
Ministry of Strategy and Finance
Republic of Korea