South Korea’s National Liabilities Reach 2,772 Trillion Won—but What Does the Number Really Mean?

 South Korea’s total national liabilities reached 2,772 trillion won at the end of 2025, raising new concerns about the country’s long-term fiscal health.

The figure increased by 186.3 trillion won, or 7.2%, from the previous year. Compared with 2011, when the government first submitted its national financial statements to the National Assembly, national liabilities have increased by approximately 1,998 trillion won over 14 years.

On paper, South Korea still had positive net assets of 821.5 trillion won. However, an analysis by the National Assembly Budget Office found that the country’s net asset position would fall to negative 636.5 trillion won if assets held by the National Pension Service were excluded.

The figures do not mean that South Korea is facing immediate bankruptcy. They do, however, highlight the importance of managing government borrowing, fiscal deficits and future pension obligations over the long term.

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South Korea Recorded a Fiscal Deficit in 2025

South Korea operated its national budget amid political uncertainty, the launch of a new government, major wildfires in the country’s southeastern region and changes in US tariff policy.

The government’s original 2025 budget set total expenditure at 673.3 trillion won.

However, two supplementary budgets were approved before and after the presidential election in June, increasing planned expenditure to 703.3 trillion won.

Actual government spending reached 684.1 trillion won, while total revenue stood at 637.4 trillion won.

The managed fiscal balance, which excludes the social security fund balance to provide a clearer picture of the government’s underlying finances, recorded a deficit of 104.2 trillion won.

In simple terms, the government spent substantially more than it collected in revenue. The fiscal shortfall also increased South Korea’s dependence on government bond issuance and borrowing.

Government Debt and National Liabilities Are Not the Same

The most important point is that South Korea’s government debt of 1,304.5 trillion won and national liabilities of 2,772 trillion won measure different things.

Government Debt: 1,304.5 Trillion Won

Government debt is calculated mainly on a cash basis.

It includes government bonds, loans and other funds that the government has directly borrowed. It is therefore the figure most commonly used when discussing how much the central and local governments currently owe.

National Liabilities: 2,772 Trillion Won

National liabilities are calculated under accrual accounting, which is similar to the financial accounting system used by private companies.

In addition to government bonds and loans, this figure recognizes obligations that the government is expected to pay in the future. One of its largest components is the estimated pension liability for civil servants and military personnel.

The difference between the two figures reached 1,467.5 trillion won at the end of 2025.

This does not mean that the South Korean government must immediately repay all 2,772 trillion won. A considerable portion represents pension payments expected to be made over many years.

Nevertheless, the figure provides important information about financial obligations that may place pressure on future government budgets.

What Caused the Increase in National Liabilities?

Government bond issuance was the largest contributor to the increase.

The outstanding value of government bonds rose by 139.9 trillion won during 2025. Pension liabilities associated with civil service and military pensions increased by another 31.5 trillion won.

By the end of the year, estimated civil service pension liabilities stood at 1,076.4 trillion won.

Military pension liabilities reached 268.1 trillion won, bringing their combined total to 1,344.4 trillion won.

These pension liabilities represent the present value of estimated payments to current pension recipients and eligible government employees in the future.

They should not be interpreted as bills that must be paid immediately. Their value can also change when actuarial assumptions—such as interest rates, life expectancy and wage growth—are revised.

However, an aging population and growing pension payments mean that these liabilities remain an important long-term fiscal risk.

South Korea Reported Positive Net Assets of 821.5 Trillion Won

South Korea’s total national assets reached 3,593.4 trillion won at the end of 2025.

After subtracting total liabilities of approximately 2,772 trillion won, the government reported positive net assets of 821.5 trillion won.

Net assets increased by 188.8 trillion won from the previous year, while total assets rose by 375 trillion won.

At first glance, this might suggest that the government’s overall financial condition improved despite the increase in liabilities.

However, approximately 244.3 trillion won—or 65.1% of the total asset increase—came from growth in assets held by the National Pension Service.

Higher valuations of domestic and overseas equities contributed significantly to the increase.

Why Does Excluding the National Pension Service Change the Result?

The National Pension Fund is financed by contributions from workers and employers. Its assets are invested to pay pension benefits to the public in the future.

Although these holdings are included in South Korea’s national financial statements, they are fundamentally different from assets that the government can freely use for general expenditure.

The government cannot simply use the pension fund to finance unrelated policies or cover an ordinary budget deficit.

According to the National Assembly Budget Office’s analysis, excluding the National Pension Fund would reduce national assets to 2,134.6 trillion won.

National liabilities would remain at approximately 2,771.2 trillion won, resulting in negative net assets of 636.5 trillion won.

In other words, without the National Pension Fund, the government’s remaining liabilities would exceed its assets by 636.5 trillion won.

This calculation should be interpreted carefully.

It is not a replacement for the official national financial statement, nor does it create a new official debt figure. It is an analytical adjustment intended to show how heavily South Korea’s positive net asset position depends on pension assets that cannot be freely used as general government funds.

National Liabilities Exceeded 100% of GDP

South Korea’s accrual-based national liabilities were equivalent to approximately 103.6% of gross domestic product.

The ratio has remained above 100% since 2023.

The gap between cash-based government debt and accrual-based national liabilities has also continued to widen.

In 2021, the difference was 1,224.6 trillion won. By 2025, it had expanded to 1,467.5 trillion won—an increase of 242.9 trillion won in four years.

This widening gap demonstrates why fiscal health cannot be evaluated using government bonds and current cash flows alone. Future pension payments and other long-term obligations must also be considered.

Does This Mean South Korea Is Heading Toward Bankruptcy?

No. The figures do not mean that South Korea is about to run out of money or default on its obligations.

A national government is fundamentally different from a household or private company.

South Korea can collect taxes, issue government bonds and manage a wide range of public assets, including land, buildings, infrastructure and financial investments.

In addition, pension liabilities represent estimated payments spread over several decades rather than debt that must be repaid all at once.

It would therefore be misleading to present the entire 2,772 trillion won as an immediate debt crisis.

However, it would also be misleading to argue that South Korea faces no fiscal risks simply because its official net asset position remains positive.

The National Pension Fund has a specific purpose: paying future pension benefits. It is not freely available to support general government spending.

The balanced interpretation is that South Korea is not facing an immediate fiscal collapse, but its long-term financial burden is clearly increasing.

What Fiscal Risks Must South Korea Manage?

The National Assembly Budget Office has emphasized that the government should examine both cash-based and accrual-based fiscal indicators.

Cash-based indicators include government debt and the managed fiscal balance. Accrual-based indicators include total national liabilities, dependence on borrowing and net financial liabilities relative to GDP.

South Korea’s key fiscal challenges include:

• Controlling the pace of government debt growth
• Reducing repeated and structurally large fiscal deficits
• Managing rising interest expenses
• Securing the long-term sustainability of public pension systems
• Distinguishing National Pension Fund assets from general government resources
• Preparing for higher welfare and healthcare spending caused by population aging
• Balancing short-term economic support with long-term fiscal sustainability

Fiscal expansion can be necessary during recessions, disasters and other national emergencies. However, continued reliance on borrowing can reduce the government’s ability to respond to the next crisis.

Final Thoughts

At the end of 2025, South Korea had cash-based government debt of 1,304.5 trillion won and accrual-based national liabilities of 2,772 trillion won.

The country reported total assets of 3,593.4 trillion won and positive net assets of 821.5 trillion won.

However, a large part of the asset increase came from the National Pension Fund. When those pension assets are excluded, the adjusted net asset position falls to negative 636.5 trillion won.

These figures do not signal South Korea’s immediate bankruptcy. They do, however, serve as a warning that government borrowing, persistent fiscal deficits, interest expenses and future pension payments must be managed more carefully.

The real question is not simply whether the government should spend more or less.

The more important questions are where public money is being spent, whether that spending improves the country’s long-term economic capacity and how the government plans to finance its commitments without placing an excessive burden on future generations.

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Source: National Assembly Budget Office – Analysis of South Korea’s 2025 Fiscal-Year Accounts

This article is for informational purposes only.