Worries about the negative impact of rising interest rates on the South Korean economy are mounting, with some experts calling for a flexible approach in policy to tackle soaring debts shouldered by the government, companies and households.

The predominant monetary policy trend both at home and abroad clearly leans toward raising the rates to keep high inflation under control. Last Wednesday the US Federal Reserve, as widely expected, raised its short-term borrowing rate by 0.75 percentage point to a target range of 3.75-4 percent, the highest level since January 2008.

Although there were some signs about slowing the pace of rate increases, Fed Chair Jerome Powell dismissed the idea that the pace of tightening would pause soon.

On Thursday, the Bank of England also hiked its key rate to 3 percent, up from 2.25 percent, after consumer price inflation hit a 40-year high in September.

On Oct. 27, the European Central Bank opted for the so-called “jumbo” hike of interest rates in a bid to bring down record inflation in the eurozone, bumping the bank’s three key interest rates by three-quarters of a percentage point.

The fact that the US Fed, the BoE and the ECB all moved in lockstep to go for an outsized rate hike illustrates their resolve to tame out-of-control inflation despite the threat of economic recession.

Given what has unfolded abroad, the Bank of Korea is expected to raise the benchmark rate by 0.5 percentage point when it holds a rate-setting meeting on Nov. 24. The BOK hiked the key rate to 3 percent last month, a record high in 10 years. If the central bank indeed raises the rate by 0.5 percentage point again later this month, South Korea’s interest rate will rise to 4 percent, a burdensome level for all economic players struggling to pay rising interest rates for loans they took out earlier.

In fact, experts cautioned the annual interest rates applied to loans will rise to as high as 9 percent, a dizzying rate for those who have to buy houses or run business by taking out fresh loans from banks and second-tier financial firms.

The country’s household debt alone is hovering at an explosive level. Outstanding household credit had reached 1,869.4 trillion won ($1.34 trillion) as of the end of June, up 6.4 trillion won from three months earlier, according to the Bank of Korea. And the number of households at high risk in terms of financial liabilities reached 381,000 as of the end of last year, the bank said last month. The combined debt volume of high-risk households as of last year amounted to 69.4 trillion won, making up 6.2 percent of the country's entire debt liabilities.

State agencies and companies are not immune to risks linked to rising interest rates. About 70 percent of loans companies have taken out from banks are based on variable interest rates. If cash-strapped companies fail to deal with growing financial burdens, not only the wobbly financial market but also the real estate and other major economic sectors are feared to face more troubles such as a rise in the number of bankruptcies in the coming months.

The government has been unveiling a series of measures to help households and companies grapple with higher interest rates and stabilize the financial market hobbled by a credit crunch in the aftermath of the Legoland fiasco.

As the interest rates are forecast to remain at a high level or rise further next year, debt problems and credit crunch are feared to deepen further. The government should take more drastic and proactive policy measures, such as setting a new guideline on interest rates for bank loans, extending financial support for cash-strapped firms and mapping out specific debt relief plans.