President Lee: "Must lift lower end of K-shaped growth"... Proposes direct government purchase of long-term delinquent debt

Called for focus on three key social policies: housing, jobs and inclusive finance
"Need groundbreaking measures that go beyond expanding existing policies"
Urged stronger support for vulnerable borrowers amid prolonged high interest rates

President Lee Jae-myung called for groundbreaking measures to narrow the polarization gap that go beyond the framework of existing policies, in order to support vulnerable groups left out of the benefits of economic growth. He also said the government would make active use of the fiscal headroom created by restructuring spending on a scale of 100 trillion won to advance three key social policies: housing supply, job security and inclusive finance.

President Lee Jae-myung speaks at a Cabinet meeting held at Cheong Wa Dae on the 13th. 2026.10.13 Yonhap News

At a Cabinet meeting he chaired at Cheong Wa Dae on Oct. 13, President Lee said, "The brighter the light of growth, the more carefully we must examine the shadows it casts," adding, "It is time to join forces to bridge the polarization gap and lower the walls of inequality for greater growth and sustainable development."

His remarks came amid a view that income and asset disparities have barely improved, even as domestic and international institutions have successively raised their economic growth forecasts and some companies have posted record-high results. President Lee expressed concern, saying, "If we continue to leave the problems facing many people unaddressed, they could have a major impact on the economy as a whole, and the door to new growth, which we have managed to open with difficulty, could soon close again."

He called on the government to "concentrate its capabilities on advancing three key social policies: housing supply, job security and inclusive finance," adding, "From the perspective that these three key social policies must provide support for the three mega-projects to succeed, please move quickly to identify specific, feasible policies."

During the ensuing discussion, President Lee repeatedly emphasized that simply supplementing existing policies or increasing the scale of support would not be enough to resolve polarization. He called in particular for a change in policy thinking, given the expanded fiscal headroom. "Didn't we free up 107 trillion won from existing spending by eliminating or reducing programs and redirect it to more efficient areas?" he said. "Tax revenue has also increased significantly lately, giving us many more things we can do."

He added, "Whether it is reducing polarization, jobs, youth policy, balanced regional development, talent development or suicide prevention, we need to go beyond merely improving what we have been doing." He said that "now that South Korea has set a course to move from a follower nation to a leading nation, we need to make a groundbreaking change," and instructed officials to gather a broad range of views, including those of experts critical of the private sector and government policies, to develop unprecedented measures.

The discussion turned to inclusive finance, including a proposal for the government to directly purchase long-term delinquent debt. Financial Services Commission Chairman Lee Eog-weon reported that the government had purchased about 980,000 claims worth 11.9 trillion won, covering small, long-term delinquent debts of 50 million won or less that had been overdue for at least seven years. He explained that collection efforts were suspended immediately upon purchase, allowing debtors to escape collection pressure.

While recognizing these results, President Lee said, "There is still a lot more to be done," and pointed to the need to improve the structure through which delinquent debt is traded. "Couldn't the government purchase debt that has entered the market?" he asked. "If we can buy it for 3% to 5% of the principal, couldn't we buy it at 5% and resolve it?" His point was that the government could purchase debt at a low price and then restructure or settle it, a potentially more fiscally efficient approach than simply increasing welfare spending.

President Lee Jaemyung speaks at a Cabinet meeting held at Cheong Wa Dae on Oct. 13, 2026. Yonhap News Agency

He also raised concerns about moral hazard resulting from debt relief and claims that it unfairly disadvantages people who repay their debts diligently. President Lee said, "From the perspective of people who work hard to repay their debts, some argue, 'Why are some people getting their debts paid off while those who have repaid theirs get no benefits?'" However, he added, "No one would endure being unable to engage in ordinary financial transactions or social life while holding out in the hope that their debt will be written off in five or seven years."

He noted that leaving long-term delinquent borrowers without assistance could exclude them from economic activity, causing losses to the country, and ultimately leave them dependent on basic livelihood assistance, potentially increasing government spending. President Lee stressed, "It may be fiscally beneficial to clear past debts and give people the opportunity to live as contributing members of society," adding, "Beyond fiscal benefits, it is the state's duty to ensure that people can maintain a minimum standard of living."

He also called for proactive measures to prepare for the possibility of high interest rates persisting for an extended period. "This is still just an expansion of what we have done in the past, and I think we need to go further," he said, reiterating, "Unless we lift the lower end of K-shaped growth, growth at the upper end could also be held back." President Lee said reducing suicides caused by economic hardship was also an important goal of inclusive finance and stronger social safety nets. "The government can do a great deal to prevent people from giving up on life because of the struggle to make ends meet, and it must do so," he said, emphasizing the importance of debt restructuring and financial support for low-income households.

This content was produced with the assistance of AI translation services.