Sound Fiscal Policy vs Ineffective Fiscal Policy... Budget Review Expected to Face Challenges Again This Year

Noh "Tightening and Deficits Must Be Handled Separately"
Clash Between Ruling and Opposition Inevitable Over R&D Cuts
Budget Cuts for Local Currency and Saemangeum Project

The review of next year’s budget bill by the National Assembly is already expected to be a rough road as the year-end approaches. The ruling party emphasizes sound fiscal management by eliminating populism, but the opposition criticizes that the country’s treasury is being depleted. Fierce clashes seem inevitable over specific projects such as the significantly cut research and development (R&D) budget, the local currency budget pushed by Lee Jae-myung, leader of the Democratic Party of Korea, and the Saemangeum budget.

According to political circles on the 30th, the ruling and opposition parties are engaged in heated debates regarding the next year’s budget bill that the government will submit to the National Assembly on the 1st of next month. The most contentious issue between the parties concerning the government’s budget formulation direction is the matter of “sound fiscal management.” Kang Min-guk, chief spokesperson of the People Power Party, stated, “This reflects the Yoon Seok-yeol administration’s firm determination for sound fiscal management, correcting the damage caused by reckless, indiscriminate budget spending over the past five years of the previous government.” He added, “The government boldly excluded habitual government bond issuance and budget expansion practiced by past administrations, aiming for responsible budgeting to strengthen South Korea’s economy and secure the future generation.”

On the other hand, the opposition’s evaluation was the exact opposite. The Policy Committee of the Democratic Party of Korea pointed out, “With revenues decreasing in next year’s budget, the country’s treasury is being depleted, and it is difficult to find any effort by the government to replenish the fiscal coffers, clearly exposing the government’s incompetence.” Jang Hye-young, a Justice Party lawmaker, said at a press conference that day, “Despite the austerity measures, deficits are still expected. The projected fiscal revenue remains at 612 trillion won, resulting in a deficit of about 45 trillion won.”

The National Assembly Special Committee on Budget and Accounts is holding a plenary session.

It was also mentioned that even the principle of sound fiscal management, which the government advocated for introduction, was not upheld. The Democratic Party criticized, “The government is pushing for legislation to keep the fiscal deficit within 3% of the gross domestic product (GDP) when the national debt ratio is below 60%, but the government irresponsibly failed to adhere to the fiscal rules it promised in next year’s budget.” The government’s disclosed ratio of the managed fiscal balance deficit to GDP reaches 3.9%.

The opposition particularly expressed concern over cuts to the research and development (R&D) budget. Kim Han-kyu, floor spokesperson for the Democratic Party, pointed out, “The R&D budget was cut by 5.2 trillion won from 31.1 trillion won this year. Essential budgets that should be significantly increased for the country’s future were indiscriminately slashed without proper explanation or criteria.” Until now, the government and ruling party have emphasized the need to adjust the R&D budget, citing its inefficient management.

Voices of opposition also erupted regarding specific projects. The local love gift certificate (local currency) project, actively promoted by Democratic Party leader Lee Jae-myung, was completely excluded from this year’s budget. The local currency budget was allocated 668.9 billion won in 2020, 1.2522 trillion won in 2021, and 605.2 billion won in 2022. However, the government cut the entire amount last year, and about 300 billion won was allocated during the National Assembly’s budget review process. The government did not include this budget in next year’s proposal either. The government’s position is that this should be promoted with local government funds. The Democratic Party opposed the government’s budget formulation policy, saying it is a project that greatly benefits the people.

Other projects such as Saemangeum are also expected to become points of contention. Initially, the government allocated a total of 662.6 billion won, but during the Ministry of Economy and Finance’s review process, 514.7 billion won (77.7%) was drastically cut. Prime Minister Han Duck-soo reportedly instructed Land, Infrastructure and Transport Minister Won Hee-ryong and others to conduct a full review of Saemangeum development, saying, “Budget input may decrease until a new basic plan is drawn up.” Democratic Party lawmakers from the Jeonbuk region held a press conference at the National Assembly that day to condemn the cuts. Democratic Party lawmaker Yoon Joon-byung reacted, saying, “The massive budget cuts are political retaliation.”

Meanwhile, the National Assembly’s Special Committee on Budget and Accounts will hold a plenary session to begin the audit of the settlement of accounts.

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