Government Should Support Local Bond Interest Payments

The Gyeonggi Province Mayors and Governors Association (Chairman Kim Moon-won, Mayor of Uijeongbu) has urged the government to support the repayment of local bond interest issued by local governments in the province during the early budget execution process.

The association held its 13th regular meeting in Pyeongtaek on the 8th and decided to recommend the establishment of a new basis for local bond support in the current Local Allocation Tax Act enforcement ordinance.

According to the association, as the government has pursued early budget execution as one measure to overcome the domestic economic crisis this year, most local governments have seen a sharp increase in local bond issuances.

The scale of local bond issuances nationwide stands at 6.8239 trillion won, while in the Gyeonggi Province municipalities it amounts to 548.7 billion won. Among these, Suwon City is known to have issued approximately 60 billion won in local bonds.

The association expressed concerns about fiscal deterioration of local governments due to decreased national tax revenue from the government's tax reduction policy, as well as interest losses and interest burdens from local bond issuances resulting from the cancellation of fixed deposits placed in public treasuries to cope with financial demands from early execution and other measures.

The association also pointed out that excessive interest repayments from short-term self-financed borrowing and losses in interest income are occurring.

Accordingly, the association decided to urge the government to compensate for the interest burden and the decrease in interest income for project costs executed through early local bond issuances or temporary borrowings by allocating separate specific funding.

Meanwhile, the National Mayors and Provincial Governors' Council had previously argued on October 28 that the government should bear the local bond repayment interest resulting from early budget execution.