Each Ministry to Reassess Next Year's Project Budgets from Scratch... Aftermath of Fiscal Strategy Meeting

Government ministries will conduct a comprehensive review of next year’s project budgets. This comes as budget authorities have requested each ministry to resubmit their proposed budgets for the coming year. With the government likely to lower the overall expenditure growth rate for next year’s budget to 3-4%, budget authorities also intend to reexamine the budget focusing on four key areas: core national functions, protection of the vulnerable, future growth engines, and quality job creation.

According to government officials on the 2nd, the Ministry of Economy and Finance recently convened planning and coordination directors responsible for each ministry’s budget and instructed them to resubmit their budget requests for next year by the 3rd. Each ministry annually submits its budget requests for projects under its jurisdiction to the Ministry of Economy and Finance by May 31. The Ministry then uses these requests as a basis to finalize the government’s budget proposal for the following year by late August or early September.

This measure is to implement President Yoon Seok-yeol’s remarks at the National Fiscal Strategy Meeting held on the 28th. Earlier, President Yoon stated at the meeting, “Even if we lose elections, we must maintain sound fiscal management for the country.” As the National Fiscal Strategy Meeting is the highest-level forum for discussing national fiscal issues such as next year’s budget, the outcome of the meeting will influence the outline of the next year’s budget proposal.

This year, as President Yoon emphasized a sound fiscal policy with unprecedented intensity, focusing on selection and concentration, a corresponding restructuring process is underway. This is interpreted as a plan to reduce the expenditure growth rate in line with sound fiscal principles amid a tax revenue shortfall situation.

[Image source=Yonhap News]

Next year’s budget is expected to concentrate on the four key areas mentioned by President Yoon: strengthening essential national functions such as defense and law enforcement, protecting the vulnerable, expanding future growth engines, and creating quality jobs.

The Ministry of Economy and Finance has expressed its intention to restructure projects except those that contribute to national interests and improve citizens’ lives. In particular, projects funded by national subsidies, which have been criticized for moral hazard and waste of public funds, will begin reduction and abolition procedures starting next year. Additionally, projects flagged by the National Assembly or the Board of Audit and Inspection for issues, as well as those with low performance evaluations in each ministry’s self-assessment, will be reviewed as candidates for reduction or abolition.

The fiscal investment approach for balanced regional development, which has been centered on national funds, will shift to a paradigm led by local governments and the private sector. The plan is to change to a method that utilizes private sector capabilities and capital, such as regional revitalization investment funds. Local governments and the private sector will lead the planning of regional development projects, while the central government will use seed investments and regulatory easing to attract private capital investment.

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