November 1997. Korea's foreign reserves ran dry, forcing an emergency IMF bailout request. The debt-to-GDP ratio at the time stood at just 11.9%. Government finances were sound. The problem was a mountain of short-term external debt stacked by conglomerates and financial institutions. The IMF saved Korea — and Korea repaid the bailout early in 2001, declaring: 'We overcame it.'
Twenty-five years later, in April 2026, the IMF has called Korea's name again. This time, it is not a compliment.
The IMF's April 2026 Fiscal Monitor, released April 15, singled out Korea and Belgium as advanced economies facing 'significant increases' in debt-to-GDP. This language has never before appeared in the Fiscal Monitor in reference to Korea. Five months ago, the IMF used the phrase 'gradual increase.' The warning has been upgraded.
The numbers are stark. Korea's general government debt-to-GDP is projected to rise from 54.4% this year to 56.6% in 2027, cross 60.1% in 2029, and reach 63.1% by 2031 — more than five times the 11.9% recorded on the eve of the 1997 crisis. Spain and Japan are forecast to reduce their ratios by 10 to 14 percentage points over the same period. Korea is moving in the opposite direction.
The paradox starts here. Korea's 1997 debt explosion was not, strictly speaking, government-created. It was corporate and financial sector leverage that imploded. But restructuring costs landed on the public balance sheet — and post-crisis, government debt grew at three times the rate of GDP growth. The state paid the 1997 bill on behalf of the private sector. And that bill is still accruing.
None of this means a 1997 repeat is imminent. That crisis was an acute FX shock; this is slow-moving fiscal deterioration. The IMF's own projections eased slightly from October's 64.3% forecast for 2030 to the current trajectory, helped by a nominal GDP boost from the semiconductor boom. The denominator got larger — not because fiscal management improved.
IMF Fiscal Affairs Director Rodrigo Valdes was direct: 'Fiscal buffers have been significantly eroded, increasing exposure to shifts in financial conditions and market sentiment.' In 1997, FX reserves shrank from $30 billion to $4 billion and the country nearly collapsed. This time, the thinning buffer is fiscal space. The form is different. But the same institution is sending the same country another warning.
