South Korea’s absence of a fiscal anchor — a rule that limits how much the government can spend or borrow — is emerging as a critical risk to its financial credibility as President Lee Jae-myung’s administration pursues an expansionary budget and record levels of debt.

The International Monetary Fund (IMF) warned in September that Korea is one of only two Organization for Economic Co-operation and Development (OECD) member states without a fiscal anchor.

The warning comes as Seoul prepares a $505.7 billion (728 trillion won) budget for 2026, an 8.1% increase from this year, underscoring the growing divide