Rumors about “a crisis in April” recently swirled around in the financial and construction sectors last week, floating a possibility that debt problems stemming from project financing could spin out of control and touch off a chain reaction of insolvencies and a credit crunch among home builders and financial firms.

The gist of the rumor is that the government would start restructuring the PF-related sector saddled with troubled building projects and the shortage of funds once the April 10 parliamentary elections are over. This would force weak construction companies to go under, and then hit brokerages and secondary financial firms that lent loans to the beleaguered builders, triggering a wider financial crisis.

Government officials are generally slow to express their views on wild rumors that are likely to fade away over time. The rumors about the PF crisis in April, however, prompted a relatively quick and resolute response from a key aide to President Yoon Suk Yeol, reflecting the potentially explosive impact of such a crisis.

Sung Tae-yoon, director of national policy at the presidential office, said on a KBS TV program Sunday, “There is no chance that a crisis may break out in April.”

Stressing that the government was closely monitoring the PF-related situation, Sung said the most important factors that could worsen the PF problem are interest rates and the construction market conditions.

“Fortunately, interest rate conditions are improving even without (a central bank) rate change,” Sung said. If the benchmark rate is cut, overall conditions about the PF situation in the property market will get better, he added.

High interest rates, coupled with a housing market’s slowdown and rising construction costs, are the major negative factors that could deal a critical blow to PF-based home builders and related financial companies.

The Bank of Korea froze its policy rate at 3.5 percent for the ninth session in February but is now expected to begin cutting rates later this year in step with the US Federal Reserve, which signaled it plans three rate cuts before the end of the year.

But not all factors look hopeful. The market conditions in the construction sector -- one of the two critical factors pinpointed by Sung -- are deteriorating as the housing slump continues. According to the Ministry of Land, Infrastructure and Transport, 886 construction companies have filed for voluntary closure and six have gone bankrupt in less than three months this year. In addition, unsold apartment units continue to pile up, especially among builders outside the metropolitan region.

Particularly worrisome in connection with the lethargic housing market are securities firms, whose property PF loans had a delinquency rate of 13.73 percent as of the end of last year -- far higher than 6.94 percent at savings banks and 2.7 percent on average for the entire financial sector.

There is no doubt that authorities must keep a watch on the PF-linked financial risks in consideration of the increase in delinquency rates and negative market developments. But the current figures seem far more manageable than the past PF crisis that started in 2011 and sent delinquency rates soaring in 2013-2015. This is why both financial authorities and the presidential office strongly claim the ongoing PF woes are unlikely to result in a broader financial crisis in April.

The real task for policymakers is to figure out why rumors about a PF crisis keep surfacing again and again. One reason might be that the government and financial authorities earlier decided to address the PF problem only after the elections, even though financial firms should lose no time in handling PF debt losses amid rising loan delinquency rates.

Another aspect to consider is that recurring risk rumors should not be ignored, as they tend to reflect concerns among market players -- a warning signal that deserves attention, especially in the financial markets, where public sentiment matters.