Hong Nam-ki: "New Government Must Legalize Fiscal Rules"... The Longest-Serving Treasury Keeper Emphasizing Soundness Until End of Term

US Washington DC G20 Coverage Accompanying Reporters Meeting
"105 Countries Worldwide, 49 US States Adopt Fiscal Rules...Urgent Early Legislation of 'Korean-Style Fiscal Rules'"
Emphasis on Fiscal Rules Efforts in S&P Meeting...S&P Shows Interest in 2nd Supplementary Budget

[Asia Economy Washington (USA) = Reporter Kwon Haeyoung] Hong Namgi, Deputy Prime Minister and Minister of Economy and Finance, repeatedly emphasized fiscal soundness even during his final business trip of his term. As the "keeper of the nation's treasury," he strongly pushed for the need to legislate fiscal rules, which failed to pass the National Assembly, while also highlighting South Korea's efforts to strengthen fiscal soundness during a meeting with the international credit rating agency Standard & Poor's (S&P). This was his final appeal as the longest-serving incumbent Minister of Economy and Finance, who had fought multiple times against political demands for "money printing" amid the COVID-19 pandemic.

On the 21st (local time), at a press briefing with accompanying reporters covering the G20 Finance Ministers meeting held in Washington DC, Hong said, "Our country's national debt ratio this year is 50%, and it is expected to approach 60% within the next 5 to 6 years," adding, "The next government must legislate fiscal rules without fail."

South Korea's national debt stands at 1,075.7 trillion won based on the first supplementary budget, reaching 50.1% of the Gross Domestic Product (GDP). This is a 14.1 percentage point increase from 36% in 2017, the first year of the current administration. The integrated fiscal balance deficit ratio relative to GDP worsened from 1.6% in 2018 to -0.6% in 2019 and -3.7% in 2020. This deterioration is due to the government rapidly increasing expenditures through multiple supplementary budgets under political pressure following COVID-19.

He expressed regret, saying, "The government announced the introduction plan for Korean-style fiscal rules in September 2020 and submitted a bill, but it has yet to be legislated." He continued, "Currently, 105 countries, including advanced and developing nations, and 49 out of 50 U.S. states have adopted various forms of fiscal rules," emphasizing, "The next government must include the legislation of fiscal rules in its national agenda and push for it without fail."

Furthermore, before the briefing, Hong met with Roberto Saipon Arevalo, Global Head of Sovereign Ratings at S&P, to emphasize the South Korean government's efforts to strengthen fiscal soundness. He stated, "Considering the increased fiscal deficits and national debt during the pandemic response, a multifaceted government effort is necessary to maintain fiscal sustainability going forward," and added, "The Korean government will continue to pursue policy efforts for fiscal stabilization, including the establishment of fiscal rules." During this process, S&P showed interest in the second supplementary budget planned by the new government and expressed intentions to hold policy consultations with the new administration around June. S&P is scheduled to evaluate and announce South Korea's sovereign credit rating in the second quarter.

International credit rating agencies are closely watching whether South Korea adopts fiscal rules. According to International Monetary Fund (IMF) data, 105 countries worldwide, including 31 advanced economies, have adopted fiscal rules. These take various forms, such as limiting debt, controlling fiscal deficits, or regulating revenues and expenditures, with most countries adopting multiple fiscal rules.

According to the National Association of State Budget Officers (NASBO), 49 U.S. states have adopted various forms of fiscal rules. For example, New Jersey limits annual debt to 1% of total expenditures and restricts expenditure growth to below the personal income growth rate. Alaska manages debt limits based on oil revenues, restricting principal and interest repayments, and links expenditures to population growth and inflation rates to prevent unchecked increases. Colorado requires a public referendum for debt issuance.

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