[Column] 'Jaegyeon Junchik' Pushed Aside in Discussions Due to Populism

[Asia Economy Sejong=Reporter Kwon Haeyoung] '14 trillion won → 16 trillion won + alpha (α) → 17.5 trillion won → ○○ trillion won after the presidential election?'

Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance, initially insisted that the supplementary budget (추경) must not be increased, but its size has continued to expand through discussions between the ruling party and the government. Even though the financial authorities said they would resist any agreement between the ruling and opposition parties, they are gradually increasing the supplementary budget under pressure from the ruling party, despite being in the final stages of the administration. After the next administration takes office following the presidential election, it seems inevitable that supplementary budgets in the tens of trillions of won will be formulated regardless of which side wins. Concerns are growing over chronic fiscal deficits caused by populist spending, especially as the national debt has surpassed 1,000 trillion won and 50% of the gross domestic product (GDP).

In fact, looking back at several past presidential elections, it is hard to recall a time when candidates from both the ruling and opposition parties unanimously promised to distribute money like a helicopter drop. There is no candidate who claims to manage the national finances for future generations, even if you look closely. Through recent elections, both parties seem to have realized the power of last-minute spending before elections.

However, the political frenzy intoxicated by 'vote-buying' must end with this election. The last bastion to protect national finances from populist spending and giveaway pledges that disregard the national debt is the introduction of a 'fiscal rule' that legally sets limits on national debt and fiscal deficits. Regardless of the situation before the election, the next president of the Republic of Korea must make the legislation of fiscal rules, which has been stalled in the National Assembly for over a year, a national agenda. Until now, under implicit standards without fiscal rules?which have been adopted by 126 countries worldwide and 36 OECD member countries?our financial authorities have maintained fiscal soundness. However, under the current administration, the political sphere has recklessly shaken these standards, making the introduction of fiscal rules no longer optional but imperative.

The International Monetary Fund (IMF) projected that South Korea’s national debt growth rate will average 5.4% annually from 2021 to 2026, ranking first among OECD countries. Considering that the national debt surged from 660.2 trillion won in 2017, the first year of the current administration, to 965.3 trillion won in 2021, this is not an unreasonable forecast. Welfare policies are only possible when national finances are sound. If fiscal deficits become chronic to an irreversible extent, it will already be too late.

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