The Only Supplementary Budget Drafted by Past Transition Teams Was During the '1998 IMF Crisis'... Embarrassing Situation for the Ministry of Economy and Finance

Moon-Yoon 'First Dinner Meeting' May Discuss Supplementary Budget Proposal

President-elect Yoon Suk-yeol is touring the briefing room of the 20th Presidential Transition Committee set up at the Financial Supervisory Service Training Institute in Tongui-dong, Jongno-gu, Seoul, on the morning of the 28th.
[Image source=Yonhap News]

[Asia Economy Sejong=Reporter Son Seon-hee] A power struggle is unfolding between the old and new authorities over the preparation of a supplementary budget (추경) estimated to be as large as 50 trillion won. Moreover, with the local elections scheduled for June, the political circles, regardless of party, have simultaneously pressured the financial authorities. However, no one has clearly presented a concrete plan for securing the funds, leaving the Ministry of Economy and Finance caught in a difficult position.

According to the National Assembly's legislative information system on the 28th, the only time a supplementary budget was submitted to the National Assembly during a presidential transition period when the Presidential Transition Committee (Insoo-wi) was operating was during the 1998 foreign exchange crisis. The first supplementary budget in 1998 was submitted on February 9, before the inauguration of the late President Kim Dae-jung on February 25. At that time, due to the urgent economic crisis with companies collapsing in succession and tax revenue shortfalls reaching trillions of won, the incoming administration's transition committee and the government jointly formed the '12-member Emergency Economic Measures Committee' to work together on preparing the supplementary budget.

Except for the foreign exchange crisis, when the nation faced a crisis and there was no distinction between ruling and opposition parties, there has never been a case where a supplementary budget reflecting the new administration's pledges was prepared and submitted by the previous government under the current transition committee system.

The next government will take office already burdened with a national debt of about 1,000 trillion won, so to secure a large-scale supplementary budget amounting to tens of trillions of won, it is essential to cut and redistribute the already allocated budget. Therefore, restructuring the budgets for the Moon Jae-in administration's flagship national projects, such as the 'Korean New Deal' and 'job creation projects,' is being prioritized.

The problem is that carrying out this task before the current government's term ends is not easy. The Blue House has expressed an official stance of stepping back by citing 'financial authorities' opposition' to the preparation of the supplementary budget, fearing a 'power clash' frame, and intends to observe the National Assembly discussions. However, there is an undercurrent of discomfort regarding the Moon Jae-in administration's flagship budget projects being targeted for 'restructuring.'

Shin Yong-hyun, spokesperson for the transition committee, held a briefing the day before and repeatedly pressured, saying, "We strongly request that the current government submit the supplementary budget to the National Assembly." However, he did not specifically mention the size of the supplementary budget or the method of securing funds. In effect, the old and new powers are using the Ministry of Economy and Finance as a shield while tugging at each other.

The political circles, with nationwide elections two months away, have also joined in. Both the People Power Party and the current ruling party, the Democratic Party of Korea, appear to be coordinating in anticipation of the local elections. Park Hong-geun, the new floor leader of the Democratic Party, said, "The principle that the supplementary budget should be prepared as soon as possible and fully compensated remains unwavering," and added, "We will persuade and pressure the government." However, he favors issuing additional deficit bonds rather than restructuring the existing budget.

The Ministry of Economy and Finance, which cannot help but worry about fiscal soundness amid already ballooning expenditures, is deeply concerned. In fact, Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance, is known to have a negative stance on preparing a large-scale supplementary budget due to concerns about external credibility. Since responsibility issues could arise later regarding fiscal management, he is effectively not planning to prepare a second supplementary budget during his tenure, which is expected to coincide with the current government's term.

Ultimately, the issue of preparing the supplementary budget is expected to find a solution at the dinner meeting scheduled for the afternoon between President Moon Jae-in and President-elect Yoon Seok-youl. For now, only preliminary work for the supplementary budget preparation is underway, with a plan to submit it to the National Assembly immediately after the new government takes office being strongly considered.

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