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State bond sales hit record high in first half

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(Globalpost/GlobalPost)

SEOUL, July 7 (Yonhap) -- Sales of state bonds reached a record high in the first half of the year as the government, facing a revenue shortfall, is preparing to increase economic stimulus spending, data showed on Sunday.

According to the data compiled by the Korea Financial Investment Association, state bond sales amounted to 71.85 trillion won (US$62.9 billion) in the January-June period, up 18 percent from a year earlier.

The first-half increase in state bond sales also marks the sharpest gain since the first half of 2009 when the comparable figure was a 41.7 percent on-year rise as the government struggled with the aftermath of the global financial turmoil in 2008, the data showed.

State bonds include bonds sold by central and local governments.

As of end-June, the outstanding amount of state bonds reached 447.56 trillion won, the data showed.

Since President Park Geun-hye took office in February, the government has engaged in various stimulus efforts, including a 17.3 trillion won supplementary budget and a set of policies aimed at boosting the slumping property market along with measures to boost investment in the corporate sector.

The government recently raised its economic outlook for the year to 2.7 percent from the previous 2.3 percent as it expects to see positive impacts from its back-to-back stimulus measures in rejuvenating the country's overall economic conditions.

The increased sales of state bonds also came as the government is facing a shortfall in tax revenues.

The 2013 tax revenue target is set at 199 trillion won, but as of end-April, the collection amounted to 70.5 trillion won, or 35.4 percent of the target, and the figure is 8.7 trillion won smaller than a year earlier.

Weak corporate earnings make it difficult for local firms to pay corporate income tax and sluggish private spending curbs the collection of indirect taxes, which account for over 50 percent of Korea's state tax earnings.

The government is ramping up its efforts to push for fair tax justice and expand the revenue base to help finance its massive fiscal and welfare spending. The country's tax authorities have been seeking to crack down on tax evasion and to regulate the underground economy as part of such efforts.

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