The fiscal status of local governments in major provinces has worsened critically as their combined debt has snowballed over the past five years.

When the nation was hit by the 2008 global financial crisis, the central government recklessly used budgets held by local governments for boosting the economy, according to some research analysts.

Local governments expanded their expenditure by issuing local bonds, and as a result, their debt increased by 61 percent from 17.4 trillion won ($15.5 billion) in 2006 to 28.1 trillion won in 2011.

Some analysts warned that Korea could face a Spain-like situation where local autonomous entities are at risk of bankruptcy.

By Kim Yon-se (kys@heraldcorp.com)