[3rd Supplementary Budget] Largest Ever Spending Adjustment... Focused Cuts on Less Urgent or Delayed Projects

Deputy Prime Minister and Minister of Economy and Finance Hong Nam-ki (right) is giving a preliminary briefing on the 3rd supplementary budget proposal for 2020 at the Government Complex Sejong on the 29th of last month.

[Asia Economy Reporter Joo Sang-don] The government has carried out structural adjustments commensurate with the largest-ever third supplementary budget (supplementary budget) plan.

According to the third supplementary budget plan announced by the government on the 3rd, 10.1 trillion won out of the 35.3 trillion won supplementary budget resources were secured through structural adjustments. This is the largest scale of structural adjustment in the history of supplementary budgets. Previously, during the first supplementary budget in 1998 amid the International Monetary Fund (IMF) foreign exchange crisis, 9.5 trillion won was raised through structural adjustments.

The government reduced 9.2 trillion won through budget expenditure structural adjustments and 900 billion won by utilizing fund resources. Among the expenditure structural adjustments, 3.9 trillion won was cut from expenditure projects. The budget was reduced mainly for projects delayed in execution due to the impact of the novel coronavirus infection (COVID-19), and as part of public sector pain-sharing, the government cut 10% of regular expenses such as business promotion expenses and special activity expenses of central government departments, as well as subsidy and contribution expenses.

The sector with the largest reduction in expenditure projects was welfare, which was cut by 800 billion won. First, 225 billion won was cut from the budget for sale housing and private rental loans, where demand decreased due to COVID-19, while 218.5 billion won was allocated to expand purchase rental support for newlyweds and multi-child families. Additionally, 50 billion won was cut from the urban regeneration support loan budget, which is delayed in execution, and 49.7 billion won was cut from the business owner job training support fund and industrial field work-study parallel support budget. The Ministry of Health and Welfare and the Ministry of Employment and Labor also decided to reduce their own budgets by 100 billion won and 200 billion won, respectively.

The social overhead capital (SOC) budget was cut by 600 billion won. 200 billion won was cut from projects such as the Gwangju~Gangjin and Dangjin~Cheonan expressways, and 145.4 billion won was reduced from construction projects such as the Chuncheon~Sokcho and Southern Inland Railroads. For projects that are difficult to proceed immediately, such as Gimhae New Airport and Jeju 2nd Airport, 48.3 billion won was created by reducing design fees and others.

The defense budget was cut by 297.8 billion won. The largest cut was in the defense capability improvement project to enhance military power. The entire 70.6 billion won budget for fleet air defense missile purchases was cut. Also included in the reduction list were 28.3 billion won due to contract delays in the 'Geumdoksoori-B (Batch-II) project' to build about 20 next-generation 230-ton high-speed patrol boats, and 7.8 billion won for facility construction related to tactical surface-to-surface guided missiles, which was delayed due to upgraded protection ratings. Additionally, 141.3 billion won was cut from six projects where execution is difficult or unused funds are expected due to purchase contract delays and changes in project conditions amid the COVID-19 situation.

The new deposit to the Foreign Exchange Equalization Fund of the Public Fund Management Fund was reduced by 1.2 trillion won. A total of 4.1 trillion won was also cut, including 2 trillion won in local allocation tax and 2.1 trillion won in local education finance grants, which are linked to national tax revenue, due to expected decreases in national tax revenue.

This content was produced with the assistance of AI translation services.