Record-breaking Fiscal Expansion... Ministry of Economy and Finance Losing Control and Being Led Along

Criticism of Executive Branch Reduced to Subordinate by the Assembly
Former Deputy Prime Minister Jin Nyeom: "The Executive Branch Is Not Visible... No Need for a Government That Merely Follows"
"Excessive Political Intervention in the Economy... Claims of Opposition Are Arrogant"

[Image source=Yonhap News]

[Sejong=Asia Economy Reporters Kim Hyunjung and Moon Chaeseok] President Moon Jae-in’s call for the introduction of a compensation system for losses caused by COVID-19 in public has further narrowed the Ministry of Economy and Finance’s (MOEF) standing. As the MOEF’s exclusive authority to coordinate policies and decide on funding has effectively shifted to the ruling party, it is being regarded as having lost its policy leadership and reduced to an ‘executing agency.’ The need to expedite the supplementary budget for the prolonged COVID-19 situation and the execution of the compensation system before the April by-elections is also increasing organizational fatigue.

The MOEF’s faint presence was further highlighted as President Moon’s directive emphasized additional support over fiscal soundness. On the 25th, during a briefing on the Ministry of Health and Welfare’s work, President Moon ordered, “Within the limits that the budget can bear, the Ministry of SMEs and Startups and related ministries, along with the ruling party and government, should review institutionalizing loss compensation.” This placed more weight on supporting small business owners rather than MOEF’s concerns about fiscal sustainability.

Within the ruling party’s compensation methods, the MOEF has been sidelined. The ruling party is reportedly coordinating compensation plans for small business owners and self-employed individuals who suffered sales losses due to the government’s social distancing policies, considering options such as ‘fixed amount’ and ‘loss-proportional’ compensation. Fixed amount compensation involves the government covering losses based on minimum wage or similar standards for the reduced business hours caused by gathering bans or restrictions, while loss-proportional compensation calculates the compensation amount based on changes in operating profit or sales before and after the government’s gathering ban or restriction guidelines.

Either approach is troublesome for the MOEF. The fixed amount compensation is essentially no different from previous disaster relief payments, rendering conflicts between the ruling party and government meaningless, while loss-proportional compensation requires astronomical funding, likely exceeding the debt limits allowed by the fiscal rules introduced by the government last year. Based on a revision bill proposed by Min Byung-duk, a member of the Democratic Party of Korea (compensating 50-70% of losses), approximately 25 trillion won would be needed monthly. If a similar situation persists for four months, 100 trillion won would be required.

Concerns from former senior officials who once led economic policy are growing as political voices overwhelm the executive branch. Jin Nyeon, former Deputy Prime Minister for Economic Affairs who led national finances during the IMF foreign exchange crisis, pointed out, “The ruling party should convey public opinion to the government and propose policy directions, but calling the MOEF a force opposing reform is arrogant,” adding, “According to the principle of separation of powers with the National Assembly, the executive branch should maintain the center and protect taxpayers’ money, but recently the executive branch has been invisible.” Jin emphasized, “If the government just blindly follows the party’s orders, it is unnecessary. Excessive political interference in the economy is also a big problem.”

Internal feelings of deprivation are also significant. A MOEF official said, “We played a major role and worked hard last year to receive an ‘A’ in the government’s performance evaluation, but we are exhausted because we are always seen as being in conflict with the political sphere.”

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