Government Announces 'High-Intensity Spending Restructuring'... Plans to Cut Fiscal Deficit by 50 Trillion Won

[Asia Economy Sejong=Reporter Son Seonhee] The government has announced a stringent expenditure restructuring plan to secure fiscal soundness. Starting with the budget formulation for next year, it plans to strictly manage the deficit ratio of the management fiscal balance to GDP within 3%.

The government recently held a National Fiscal Strategy Meeting chaired by President Yoon Seok-yeol, where it revealed the expenditure restructuring plan. A new fiscal rule was announced, changing the soundness management standard from the existing 'integrated fiscal balance (total revenue - total expenditure)' to the management fiscal balance, which excludes various funds.

As of the second supplementary budget this year, the management fiscal balance shows a deficit of 110.8 trillion won. The ratio to GDP reaches -5.1%.

The government plans to reduce this ratio to '-3% or less' starting next year. Considering the government's projected nominal GDP growth rate of 4.5% for next year, the deficit reduction required will be at least in the 50 trillion won range.

To reduce such a scale of fiscal deficit, the government intends to use two methods next year: revenue increase and expenditure restructuring. Despite a large-scale excess tax revenue of about 53 trillion won compared to government expectations this year, the government expects the tax revenue growth trend to continue next year.

However, since the increase in tax revenue alone is insufficient to reduce the fiscal deficit, it is anticipated that a more rigorous expenditure restructuring than ever before will inevitably accompany this effort.

To this end, the government plans to normalize the temporary expenditures that rapidly increased during the COVID-19 crisis and to comprehensively review similar and overlapping private subsidy projects from scratch. Among a total of 1,205 private subsidy projects this year, the government inspected 440 projects, identifying 61 for abolition and 191 for reduction.

The government will also manage the rapidly increased number of public officials during the previous Moon Jae-in administration and control the wage increase rate to a minimum. It plans to reduce unnecessary public institution asset sales and excessive welfare benefits such as golf courses and condos.

The government plans to announce detailed measures related to the new fiscal rule in September after public hearings and other procedures.

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