"Are Only Those Who Diligently Repay the Fools?"… Controversy Arises Over 6 Trillion Won Debt Write-Off

Amid growing controversy over plans to write off or adjust long-term overdue debts of small business owners incurred in the aftermath of COVID-19, Minister of Planning and Budget Park Hong-keun explained that "in many other countries, the state has shouldered such burdens, whereas in South Korea, individuals have often had to bear them."

Appearing on a radio broadcast yesterday (August 31), Minister Park made this remark in response to criticisms that government debt adjustments could induce moral hazard.

Regarding the background of the policy review, Minister Park stated, "We determined that helping those without the capacity to repay get back on their feet quickly contributes to the nation's overall wealth and individuals' stable lives."

He also explained, "The fruits of growth from the semiconductor super-boom need to reach the public evenly and extensively to vulnerable groups, so we plan to provide support for young people and vulnerable borrowers."

According to the "Support Plan for Vulnerable Borrowers in Preparation for the Interest Rate Hike Period" announced by the government on July 28, the eligible targets are approximately 6.3 trillion won in unsecured bonds of small business owners whose delinquency began before June 2023.

The government is considering purchasing the bonds through the Korea Asset Management Corporation and then reducing the principal or extending the repayment period.

However, critics point out issues of fairness with self-employed individuals who have faithfully repaid their debts, arguing that it could fuel a moral hazard where people think the government will wipe out their debts if they just hold out.

In fact, according to data submitted by the Credit Counseling & Recovery Service to the office of People Power Party lawmaker Park Sung-hoon of the National Assembly's Political Affairs Committee yesterday, cases of vulnerable borrowers who have been repaying their debts after receiving debt adjustments and then borrowing livelihood funds again are on the rise.

Small-scale loan applications by diligent repayers in the first half of the year totaled approximately 78.8 billion won. Applications for the second quarter alone reached 47 billion won, marking the highest quarterly figure since 2022.

In response, the government stated it will strengthen incentives for diligent repayers, such as offering preferential interest rates. However, voices are calling for fundamental measures to support recovery—rather than simple debt adjustments and write-offs that could trigger moral hazard—to be implemented first.

Reported by Lee Hyeon-yeong | Video by Lee Yu-jin | Graphics by Lee Jeong-ju | Produced by SBS Digital News
※ Please note: This article was translated by AI and may contain errors.