Thirteen of the 37 state-run institutions whose medium- to long-term finances the government monitors closely are projected to be unable to cover their interest costs with operating profit every year from this year through 2030. The government has launched a sweeping functional overhaul that will cut the number of state-run institutions by 109, but critics say consolidation alone is not enough and that measures to repair weak profitability are also needed.
Of the 37 institutions covered by the medium- to long-term financial management plan, 13 are projected to post an interest coverage ratio below one for five consecutive years, according to detailed data on the financial status of individual state-run institutions and the 2026-2030 medium- to long-term financial management plan for state-run institutions, which Rep. Kim Sang-hoon of the People Power Party, a member of the National Assembly's Finance and Economy Committee, obtained from the Ministry of Finance and Economy and released on the 12th. The analysis covered 32 institutions, excluding five that reported zero operating profit and zero interest costs: the Government Employees Pension Service, the Korea Technology Finance Corporation, the Korea Credit Guarantee Fund, the Korea SMEs and Startups Agency and the Korea Trade Insurance Corporation. The combined assets of the 13 institutions stood at 469.7 trillion won as of the end of last year.
Institutions subject to medium- to long-term financial management are public corporations and quasi-governmental agencies with assets of at least 2 trillion won or whose founding laws include provisions for government compensation of losses. The interest coverage ratio divides operating profit by interest costs; a ratio below one means an institution cannot cover even its interest costs with earnings from its core business. The number of institutions with a ratio below one fell for four straight years, from 17 in 2021 to 11 last year, but is projected to rise again to 15 this year. By 2030, the figure is expected to climb to 18.
The 13 institutions projected to post a ratio below one every year over the next five years are Korea Railroad Corp., Korea Airports Corp., Korea Mine Rehabilitation and Mineral Resources Corp., Korea Student Aid Foundation, Korea Workers' Compensation & Welfare Service, Korea Environmental Industry & Technology Institute, National Health Insurance Service, Korea South-East Power, Korea Midland Power, Korea Industrial Complex Corp., Korea Asset Management Corp., Korea Housing Finance Corp. and Korea Land & Housing Corporation. Their combined annual interest costs are estimated to reach about 4.2858 trillion won in 2030.
Six of them — Korea Railroad, Korea Airports, Korea Mine Rehabilitation and Mineral Resources, Korea Student Aid Foundation, Korea Workers' Compensation & Welfare Service and Korea Environmental Industry & Technology Institute — are suffering from chronically weak profitability. Their interest coverage ratios were below one in each of the five years from 2021 through 2025. Combined with the projections, that means 10 consecutive years in which they fail to generate enough operating profit to cover interest costs. The six held 56.3 trillion won in assets as of the end of last year, and their annual interest costs are projected to rise 16.6%, from about 1.1496 trillion won last year to about 1.3407 trillion won in 2030.
Korea Railroad's interest coverage ratio is projected to improve from minus 0.80 last year to 0.99 in 2030, still short of one. Korea Airports is expected to post operating profit of just 2.5 billion won in 2030, against interest costs of 110.8 billion won. The situation is more severe at Korea Mine Rehabilitation and Mineral Resources and Korea Workers' Compensation & Welfare Service. Both posted operating losses for five straight years and are projected to remain in the red for the next five. Korea Mine Rehabilitation and Mineral Resources is expected to record an operating loss of 126.9 billion won in 2030, along with interest costs of 303.4 billion won. Korea Workers' Compensation & Welfare Service is projected to post an operating loss of 10.2 billion won that year, with interest costs of 1.6 billion won.
Power generators' finances are also set to deteriorate. Korea South-East Power's interest coverage ratio is expected to fall from 3.08 last year to 0.66 this year, while Korea Midland Power's is seen dropping from 1.53 to 0.64. By 2030, the two ratios are projected at 0.39 and minus 0.31, respectively. An official at the Ministry of Finance and Economy said rising power generation costs have made it difficult for generators to absorb expenses, adding that interest coverage ratios could recover if oil prices and the won's exchange rate improve.
Last month the government announced a functional overhaul that would cut the number of state-run institutions by 109, including the merger of the five power generation subsidiaries and the separation of functions at Korea Land & Housing Corporation. The latest projections could change depending on the outcome of the restructuring. Whether reorganization alone can resolve chronically weak profitability remains uncertain. Analysts say tailored measures are needed that take into account both the policy roles of state-run institutions and the specific causes of each institution's financial deterioration.
Woo Suk-jin, a professor of economics at Myongji University, said state-run institutions, unlike private companies, are not run solely for profit, so a low interest coverage ratio alone should not be taken as evidence that all of them are in distress. "For an ordinary company, not being able to cover even interest with money earned from operations is a management situation so severe that survival becomes difficult," the professor said. The professor added that warning lights are flashing over the financial soundness of state-run institutions, and that the government should closely examine the causes of financial deterioration at individual institutions and prepare responses.
