Government: "4th Supplementary Budget to Increase Managed Fiscal Deficit by 0.3%P ... Urgent Expenditure Restructuring Planned"

'Fiscal Aggregate Effects and Management Measures of the National Fiscal Operation Plan' According to the 4th Supplementary Budget of 2020

[Sejong=Asia Economy Reporter Joo Sang-don] With the preparation of the 4th supplementary budget, total expenditures have increased by 7.8 trillion KRW compared to the 3rd supplementary budget. As a result, adverse effects on the management fiscal balance and national debt have become inevitable.

On the 10th, the government announced the 4th supplementary budget proposal and reported to the National Assembly the 'Fiscal Aggregate Effects and Management Measures of the National Fiscal Operation Plan' containing these details.

According to this, the deficit ratio of the management fiscal balance to the 2020 Gross Domestic Product (GDP) will be 6.1%, which is 0.3 percentage points higher than the 3rd supplementary budget (-5.8%). The national debt ratio to GDP will increase by 0.3 to 0.4 percentage points annually after 2020. After recording a debt ratio of 43.9% with 846.9 trillion KRW this year, the national debt will increase to 1,334.5 trillion KRW by 2024, raising the debt ratio to 58.6%.

The government has decided to push for drastic expenditure structure reforms to maintain fiscal sustainability. Bold structural adjustments will be made to discretionary expenditures, focusing on similar, overlapping, low-performance, and delayed execution projects, and efforts to improve expenditure efficiency will be promoted through institutional improvements such as enhancing the welfare delivery system for mandatory expenditures. Additionally, the government will actively utilize the fiscal project evaluation system to continuously pursue strategic resource allocation and expenditure structure improvements based on investment priorities.

Efforts will also be made to expand the revenue base through the reform of tax exemptions and reductions and strengthening taxation on undeclared income. Active review of reform measures will focus on items with low effectiveness and unnecessary elements among existing tax exemption and reduction systems, and taxation on undeclared income will be strengthened targeting offshore tax bases and high-amount, habitual tax delinquents. Along with this, the government plans to introduce flexible fiscal rules to secure both the role of fiscal policy and medium- to long-term sustainability.

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