President Moon Jae-in and his key economic advisors will draw a comprehensive measure to tackle the country’s soaring household debt this week. The president urged his advisors to take this issue seriously last week when the Bank of Korea reported that the debt reached nearly 1,360 trillion won in March, up 1.3% from December last year, a record high since the country began compiling the data in 2002.
“We need to discuss ways to reduce the household debt,” he told his advisors last Thursday, as it is negatively affecting the livelihoods of the low-income earners, Yonhap reported.
Kim Jin-pyo, the head of the president’s policy planning panel, also expressed concerns over the debt, while criticizing the former government’s debt mismanagement.
Moon pledged during his campaign to bring the debt down to below 150% of disposable income by expanding the credit evaluation metric system of debt-service ratio and creating jobs.
Currently, the debt to disposal income ratio stands at over 170%, well above the OECD average of about 130%. There are more than 1.8 million households that cannot pay back their debt.
The DSR measures whether borrowers can pay back principal and interest on all their loans they have taken out in time, in accordance with their annual income. DSR is considered stricter than debt-to-income ratio.
Moon seeks growth driven by an increase in laborers’ income and welfare, which would improve private consumption and investment. His labor policy included increasing the minimum wage to 10,000 won an hour, reducing the number of irregular workers in the public sector to zero and creating 810,000 public jobs.
At the same time, lowering the debt to a level close to the OECD average would be important to sustain the economy.
