S. Korea mulling including central bank's debt in public debt

SEOUL, July 2 (Yonhap) -- South Korea's government and the central bank are discussing whether to include the Bank of Korea (BOK)'s debt in data on public debt to be newly released next year, officials said Tuesday.

The government plans to provide additional figures on public debt including public firms' debt holdings in a bid to offer a more accurate picture of financial conditions in the public sector.

The BOK said that the government and the central bank are in talks over whether the central bank's issuance of monetary stabilization bonds (MSBs) would be included in the notion of public debt.

The BOK sells MSBs in a bid to soak up excess liquidity from the financial system. The outstanding value of MSBs stood at around 169 trillion won (US$149.4 billion) as of end-May.

"The government, the BOK and related agencies are discussing whether the central bank's debt is included in the category of public debt or how to calculate the value of such debt," said a senior official at the BOK.

A public hearing on the issue will be held on Thursday to accept opinions from experts.

He said that it has not been decided whether to view the total balance of the MSBs as the central bank's debt or to deduct the value of MSB holdings owned by other public institutions.

The BOK quarterly releases data on fund flows such as debt holding by the public sector including the central and provisional governments and state-run companies. But currently, the government's release of state debt does not include the debt of public firms.

Experts claim that sharp growth in debt by state-run firms is one of the potential risks for Korea, but it is not tallied as government debt when calculated under the latest international standards.

If the central bank's debt is included in the public sector's debt, the value of state debt will further rise.

According to the finance ministry, the government's debt rose to 468.6 trillion won as of 2011 if calculated based on internationally accepted accounting rules. The amount came to 420.5 trillion won when measured by currently-used calculation rules.

South Korea's debt-to-GDP ratio stood at 37.9 percent as of 2011, far lower than other advanced economies such as the U.S. and Japan, whose corresponding ratios were 102.2 percent and 205.3, according to the government.

The average ratio for member countries of the Organization for Economic Cooperation and Development stood at 102.9 percent.

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