Seoul aims its pandemic debt cleanup at 5.6 trillion won of seven-year-old arrears

The share still outstanding is an amortisation fact before it is a credit fact; the credit fact is the 4.1% overdue by three months or more ^[3], and the announcement gives that figure without naming its base. If it is 4.1% of the 154.7 trillion won still owed, the hard bucket is roughly 6.3 trillion won ^[13]. If it is 4.1% of the 358.7 trillion won originally lent, it is roughly 14.7 trillion ^[14]. The distance between those two readings is wider than everything Seoul has so far agreed to buy.

Against either reading, the costed perimeter is 1.1 trillion won of claims held by securitisation companies plus as much as 4.5 trillion held by private lending firms ^[4], so 5.6 trillion won ^[15], which is 3.6% of the outstanding balance and 1.6% of what went out the door in the first place ^[16][17]. All of it is capped at 50 million won a claim and at least seven years in arrears ^[4], meaning it is the tail the original lenders sold on rather than the loans they still carry. The Export-Import Bank of Korea's contribution, presented as its first batch write-off, is 16.2 billion won ^[6], or 0.29% of that perimeter ^[18].

The load-bearing document is still being drafted: the government says the arrears threshold for pandemic loans and the share of principal to be forgiven are both still to be designed, with a concrete plan inside a month ^[7]. Until it lands, the 20-year batch write-off at state institutions ^[5] and the fund purchases are the visible edge of a total the government has not yet published.

One asymmetry is already legible. A borrower who paid on schedule gets 0.3 percentage points off the rate and 200 million won of extra headroom from the Small Enterprise and Market Service ^[8]; a borrower who did not can convert a 7% loan into a 4.5% one, worth 250 basis points ^[9], which is about eight times the reward for good behaviour ^[19] and, per trillion won converted, 25 billion won a year of interest that lenders stop earning ^[20].

This is probably wrong, but the more interesting version is that the 5.6 trillion won of already-defaulted paper is the cheap purchase made first so the expensive forgiveness becomes sayable, in which case the eventual write-down at banks, policy lenders and guarantee funds is a multiple of what has been announced. Two other readings survive the evidence. The arrears threshold could be set far enough back that most of the 4.1% never qualifies ^[3], leaving a collections exercise in a fiscal wrapper. Or the expanded Sunshine Loan facility, 6.2 trillion won next year against 5.9 trillion this year ^[12], plus a domestic demand recovery, refinances enough marginal borrowers that the bucket cures before anyone has to forgive it. I am wrong if the plan arrives with a threshold that excludes loans still sitting on bank and policy-lender books, because then this was never a provisioning event.