The South Korean Ministry of Finance announced Friday that it will take steps to reduce the 42 trillion won (US$31.83 billion) debt of 14 financially-troubled public companies by 2026. The debt reduction will be achieved through asset sales and organizational restructuring in order to improve the fiscal health of the public sector.
The revised debt goal of 42.2 trillion won is higher than last year’s target of 34.1 trillion won. The companies included in the plan are Korea Railroad Corp., Korea Electric Power Corp. (KEPCO) and its five power-generating affiliates, Korea National Oil Corp., Korea Gas Corp., and Korea Land & Housing Corp.
The debt reduction measures involve the sale of non-core assets worth 7.5 trillion won, increasing capital by 10.7 trillion won, and other improvement tactics. It is expected that the debt ratio of the 14 firms will decrease from 214.3 percent to 188.8 percent in 2027.
The financial health of the public sector has been a source of concern due to the potential negative impacts on the country’s economy. KEPCO, in particular, has experienced a record high operating loss of 32.63 trillion won in 2020 due to higher fuel costs and limited electricity rate hikes. To remedy this, the organization has implemented a series of self-rescue measures such as restructuring of overseas businesses, property sales, and cost-cutting.
Overall, the 344 South Korean state-run firms had a combined debt of 670 trillion won in 2022, a 15 percent increase from the previous year.