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

As controversy recently arose over plans to write off or adjust the long-term overdue debts of small business owners incurred in the aftermath of the COVID-19 pandemic, Minister of Planning and Budget Park Hong-keun explained, "This is because while other countries had the state shoulder such burdens, in South Korea, individuals often had to bear them alone."

Appearing on a radio broadcast yesterday (the 31st), Minister Park responded this way to criticisms that the government providing debt adjustments induces moral hazard.

Regarding the background of the policy review, Minister Park stated, "We judged that helping individuals without repayment capacity make a swift economic comeback contributes to the nation's overall wealth and stable individual lives."

He further explained, "The fruits of growth from the semiconductor boom must reach citizens and vulnerable groups more evenly, so we plan to provide support to young people and vulnerable borrowers."

According to the "Support Measures for Vulnerable Borrowers to Prepare for the Rate-Hike Period" announced by the government on the 28th of last month, the target of support amounts to approximately 6.3 trillion won in unsecured bonds of small business owners whose arrears began before June 2023.

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

However, criticisms have emerged alongside concerns over equity issues with self-employed individuals who have faithfully repaid their debts, arguing that it could encourage moral hazard by teaching people that holding out leads the government to wipe away their debts.

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

Microloan applications by faithful repayers were tallied at around 78.8 billion won for the first half of the year, with applications in the second quarter alone reaching 47 billion won, marking a record high on a quarterly basis since 2022.

In response, the government stated that it will strengthen incentives, such as offering preferential interest rates to faithful repayers, but voices are emerging that fundamental measures to support restarting rather than simple debt adjustments and write-offs that could trigger moral hazard must precede.

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