South Korea's national debt rose to a record high last year as the government boosted a debt sale to fund its expansionary fiscal spending to ride out the COVID-19 pandemic-caused slump, the finance ministry said Tuesday.

The sovereign debt, which covers bond sales and financial borrowing by central and provincial governments, amounted to 967.2 trillion won ($796 billion) last year, sharply up 120.6 trillion won from the previous year, according to a report on the 2021 national settlement.

The 2021 debt growth slowed from 2020, when the national debt rose by the largest-ever amount of 123.7 trillion won.

The settlement report, approved by the Cabinet, will be submitted to the National Assembly by end-May after a review by the state audit agency.

The government has implemented expansionary fiscal spending to tackle the economic fallout of the pandemic.

Last year, the country drew up a national budget of 558 trillion won and created two rounds of extra budgets totaling nearly 50 trillion won to support businesses hit hard by the pandemic.

The finance ministry floated a record 180.5 trillion won in Treasury bonds last year, up 6 trillion won from a year earlier.

With a record national debt, the debt-to-GDP ratio came to 47 percent last year, up from 43.8 percent in 2020.

Despite massive budget spending, the fiscal deficit declined on-year as tax revenue increased on the back of the economic recovery and a boom in the asset market, and the national pension service saw investment profits improve.

The government's total revenue amounted to 570.5 trillion won last year, up 19.2 percent from a year earlier. Its total expenditures rose 9.3 percent on-year to 600.9 trillion won in 2021.

The consolidated fiscal balance, a key gauge of fiscal health, logged a deficit of 30.4 trillion won last year, narrowing from a shortfall of 71.2 trillion won a year earlier.

The managed fiscal balance, a measure of fiscal soundness calculated after excluding the balance of social safety funds, posted a deficit of 90.5 trillion won, compared with a shortfall of 112 trillion won in 2020.

After the national settlement, the country will have as much as 3.3 trillion won in available funds that can be used for the potential creation of an extra budget.

Meanwhile, the country's liabilities exceeded the 2,000 trillion-won mark for the first time last year due to an increase in debt sales and accrued expenses over state pension programs.

The state liabilities -- a total of bond sales, financial borrowing and unconfirmed liabilities from future pension payments -- came to a record high of 2,196.4 trillion won last year, up 214.7 trillion won from a year earlier, the report said.

The country's state assets reached 2,839.9 trillion won last year, up 352.8 trillion won a year earlier.

Net assets, a gap between assets and liabilities, reached 643.5 trillion won, up 138.1 trillion won or 27.3 percent from a year earlier. It marked the fastest on-year growth since 2011.

South Korea's national debt has risen at a fast pace in recent years, spawning concerns about its fiscal soundness.

The government said it plans to normalize COVID-19 related emergency spending to pre-pandemic levels next year and cut non-priority expenditures in a bid to enhance fiscal health.

The national debt is forecast to reach 1,075.7 trillion won this year, marking the first time that the debt would exceed the 1,000 trillion-won mark, according to an estimate by the finance ministry.

The debt-to-GDP ratio is expected to rise to a record high of 50.1 percent this year and the fiscal deficit is likely to reach 70.8 trillion won, equivalent to 3.3 percent of the GDP.

South Korea faces growing fiscal pressures as social welfare costs will likely jump amid rapid aging. (Yonhap)