[View from the field] Debt relief, new loans, and bad debt again: Why do self-employed borrowers’ debts keep returning?

South Korea is preparing another round of debt relief for self-employed borrowers, reviving a cycle that critics say could lead from write-offs to new loans and then back to bad debt.

The government plans to reduce about 6.3 trillion won in nonperforming individual-business loans issued by banks and policy-finance institutions during the COVID-19 period. The loans included in the plan have been overdue for at least three months.

The policy has prompted concerns about moral hazard. The government rejects that criticism, arguing that people with long-term overdue debt may be unable to return to economic activity, which could also hurt domestic demand.

That argument has been repeatedly emphasized by President Lee Jae Myung. But the article’s central question is whether debt relief solves the underlying problem when borrowers can later take out loans again and fall back into delinquency.