Hong Nam-ki Addresses Controversy Over 'Maengtang·Gomujul Fiscal Rules'... "Legislation Possible"

Emergency Additional Briefing Held on the 6th to Address Market Criticism
"No Reason Why Fiscal Rules Can't Be Legally Defined... Considered Flexibility Aspect"
"Presented After Intense Deliberation as Public Officials... Not a Trace of Evasion"

[Image source=Yonhap News]

[Sejong=Asia Economy Reporter Kim Hyunjung] Deputy Prime Minister for Economy Hong Nam-ki stated that it is possible to consider enacting the Korean-style fiscal rules as a law rather than a presidential decree. This comes amid concerns that if the related regulations are set as a presidential decree, they would have less binding force compared to being stipulated by law, and the principles could be shaken by administrative judgment. Along with this, Deputy Prime Minister Hong refuted the negative public opinions raised about the previously announced fiscal rules one by one, emphasizing, "As a public official, I never had even the slightest thought of trying to use tricks."

On the morning of the 6th, Hong held an urgent additional briefing at the Sejong Government Complex regarding the fiscal rules, saying, "The fiscal rules were created and announced after more than ten brainstorming sessions and intense deliberation for about three months." He specifically listed and clarified the controversies raised in the market. The related criticisms include ▲the rules being loose, ▲the use of two fiscal balances (the integrated fiscal balance and the national debt ratio) to create the formula being a trick, ▲using the integrated fiscal balance, which has a lower deficit ratio, instead of the management fiscal balance that was mainly used before to create an optical illusion, ▲lack of precise criteria for exceptions, ▲the possibility of changing the formula by administratively using exceptions for convenience, and ▲implementing the rules starting from the 2025 fiscal year budget to shift the responsibility for fiscal soundness deterioration to the next administration.

During the explanation, Hong mentioned the criticism that setting the fiscal rules as a presidential decree would have less binding force and could be swayed by political influence, stating, "If the fiscal rules were stipulated by law, there could be issues such as time lag or flexibility when adjustments to the rules are needed," and added, "If the majority of public opinion thinks that a law would be more appropriate than a presidential decree, we do not exclude the possibility of enacting a law." He continued, "However, even in cases like the national tax exemption limit, the basis is in law but the formula is set by presidential decree," emphasizing, "Even if set by presidential decree, it must go through the Cabinet meeting, so the executive branch cannot easily change it at will." He added, "We will consult well with the National Assembly before making a decision."

He also directly refuted the claim that the rules are loose. The fiscal rules announced by the government the day before aim to manage the national debt ratio to 60% of GDP and the integrated fiscal balance deficit within 3% (-3%) of GDP after 2025, but there was much controversy over using a 'multiplication' formula without specifying each standard separately. The government stated that if the product of the national debt ratio limit and the integrated fiscal balance deficit limit is '1 or less,' the rules are considered to be followed.

Hong explained, "We judged that requiring both fiscal balance rules to be met or only one to be met would be either too strict or too loose," adding, "We created a complementary formula through multiplication." He emphasized, "For the time being, there is room in the national debt ratio, but the integrated fiscal balance has already exceeded -4%, and when calculated by the fiscal rules formula, it already exceeds 0.9 and approaches 1," stressing, "Through the multiplication formula, the two complement each other, and the authorities must strongly manage and reduce it."

Regarding the use of the integrated fiscal balance in the fiscal rules, he said, "If we used the management fiscal balance, which is not internationally used, to create the fiscal rules formula, the international community would not understand this concept," and insisted, "If we had used 'management fiscal balance -5%' as the standard as some claim, internationally they would only see the number '-5' and would not understand it no matter how much we explain."

He stated that specific criteria for exceptions will be prepared through additional discussions. He said, "We will gather expert opinions and consult with the National Assembly to decide when to apply exceptions," and expressed, "It will not be easily operated by the executive branch doing it roughly on its own."

Regarding the claim that applying the fiscal rules from the 2025 fiscal year, which will be announced three years later, is a trick to shift the burden to the next government, Hong expressed his frustration. He said, "The COVID-19 crisis is already ongoing, and from now on, this rule must be respected," adding, "It should be seen as a transition period." He continued, "There are criticisms that this is a trick by the government, but as a public official, I never had even the slightest thought of using tricks," emphasizing again, "I want to reiterate that this was created after intense deliberation for three months."

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