'Korean-style Fiscal Rules' Bill to Be Legislated This Week... Tough Road Ahead Expected

[Asia Economy Reporter Kwangho Lee] The government will announce the legislative notice this week for the amendment to the National Finance Act, which includes the basis for introducing the 'Korean-style Fiscal Rules.' However, opposition is expected until the law passes, as both opposition and ruling parties are against it.

According to the Ministry of Economy and Finance on the 26th, they plan to announce the legislative notice this week to submit the amendment to the National Finance Act to the National Assembly within the year.

The Ministry of Economy and Finance has invited economic experts such as the Korea Development Institute (KDI) to gather various opinions on fiscal rules. Based on this, the final drafting of the bill is underway internally.

Earlier, the Ministry announced the plan to introduce Korean-style fiscal rules from 2025, managing the national debt ratio within 60% of the Gross Domestic Product (GDP) and the integrated fiscal balance within -3% of GDP.

In particular, they designed a formula where the value obtained by dividing the national debt ratio by 60% and the value obtained by dividing the integrated fiscal balance by -3% are multiplied to be less than or equal to 1.0, allowing the two criteria to fluctuate within a certain range.

However, exemptions from the limits will be applied in cases of war, large-scale disasters, or global economic crises.

Even if the government prepares the bill, a difficult path is expected until the law passes, as both opposition and ruling parties oppose it.

Democratic Party lawmaker Goyongjin pointed out at the recent Ministry of Economy and Finance audit, "Is it necessary to introduce this now when economic uncertainty is extremely high?" Another lawmaker from the same party, Yang Kyungsook, said, "It is hard to understand why this was brought up in a national disaster situation where expansionary fiscal policy is indispensable due to the novel coronavirus infection (COVID-19)," and criticized, "The introduction of fiscal rules is anachronistic."

People Power Party lawmaker Ryu Seonggeol said, "Instead of useless fiscal rules, we need to establish strict fiscal rules that inspire trust," and lawmaker Choo Kyung-ho questioned the effectiveness, saying, "The formula is bizarre, the limits are loose, and they say they will set the numbers in enforcement ordinances rather than the law."

Despite such opposition, the government maintains that considering the rapid increase in national debt, the introduction of fiscal rules is necessary for fiscal soundness.

Deputy Prime Minister and Minister of Economy and Finance Hong Nam-ki clearly stated his position, saying, "If fiscal rules are not legalized, it could affect the national credit rating," showing no intention to change his stance.

Deputy Prime Minister Hong also uploaded five direct lecture videos titled 'Mastering Korean-style Fiscal Rules' on the Ministry of Economy and Finance's official YouTube channel, explaining the necessity of fiscal rules point by point.

The government plans to set fiscal rules at the administrative level, such as by revising enforcement ordinances, if the amendment to the National Finance Act fails to pass the National Assembly due to political opposition.

A Ministry of Economy and Finance official said, "If the law does not go well, there are ways the executive branch can do it on its own," adding, "We will first try to make it possible by law through consultation with the National Assembly."

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