"National Finance Act Passage Strengthens 'National Assembly Control Over Finances' - National Assembly Budget Office"

Yonhap News Agency

The amendment to the National Finance Act passed on January 29, 2026 is being evaluated as having strengthened the National Assembly's control over national finances by enhancing the effectiveness of the medium-term fiscal plan and improving the transparency of reserve funds and tax revenue forecasts.

On February 5, Yang Sungmin, an analyst at the National Assembly Budget Office, stated in a report titled “Key Contents and Implications of the Amendment to the National Finance Act” that “this amendment is a measure that has institutionally expanded the National Assembly's fiscal oversight and check functions across the entire process, from the budgeting stage to execution and revenue management.”

The core change is the shift in the nature of the National Fiscal Management Plan. Until now, the medium-term fiscal plan has been criticized for presenting only fiscal targets while lacking specific implementation measures and performance evaluations. The amended law requires that concrete implementation plans for the basic direction and goals of fiscal management must be included, and that implementation performance compared to the previous year's plan must be attached as a mandatory annex. This is significant in that it enables the National Assembly to systematically examine whether fiscal targets remain mere declarations or are actually linked to policies and budgets. The report analyzed that “an institutional foundation has been established for the medium-term fiscal plan to function as a genuine benchmark for fiscal management.”

The long-term fiscal outlook system will also become more flexible. Under the previous rigid five-year projection cycle, it was difficult to adequately reflect rapid changes in economic conditions. The amended law allows the government to conduct long-term fiscal outlooks on an ad hoc basis when there are significant changes such as shifts in macroeconomic variables or modifications to fiscal systems. Given the current outlook that national debt will approach 1,800 trillion won by 2029, this is being evaluated as a mechanism to recognize fiscal risks at an early stage and to broaden the scope for policy responses.

Control mechanisms will also be strengthened for reserve funds, which have so far been operated like a “slush fund.” The amended law explicitly stipulates in the statute that the use of reserve funds must meet the requirements of unpredictability, urgency, inevitability, and feasibility of execution, and requires the government to include in the reserve fund use plan submitted to the National Assembly an explanation of how these requirements are satisfied. This is intended to reduce subjective and arbitrary use of reserve funds and to enhance accountability at the execution stage. In practice, repeated requests for corrective action related to reserve funds during the National Assembly's settlement of accounts process over the past five years served as a legislative impetus.

In the area of revenue management, the key is to strengthen the reliability of tax revenue forecasts. In light of concerns that repeated large-scale tax revenue surpluses and shortfalls have undermined the predictability of fiscal management, the government is now required to re-estimate that year's revenue every September and report the results to the National Assembly. The re-estimation report must include the estimation methods and grounds, the differences from the main budget, and an analysis of the causes of errors by tax item. The report assessed that “the government's accountability for failures in revenue forecasting has been institutionally strengthened.”

Control over tax expenditures will also be tightened. If the national tax reduction rate exceeds the statutory limit, the government must submit to the National Assembly, as attached documents to the budget bill, the details and reasons for the excess. The intent is to monitor tax expenditures, which have been relatively in a blind spot compared with expenditure budgets, at virtually the same level as the budget itself. While the report evaluated this amendment as “a measure that has institutionally strengthened the National Assembly's fiscal control function in response to the expanded scale of public finance and an uncertain economic environment,” it also pointed out that its effectiveness will depend on the government's faithful implementation and the National Assembly's ongoing oversight.

Analyst Yang stated, “A remaining task is to establish a structure in which the National Assembly's fiscal control and oversight functions operate effectively throughout the entire process of budget formulation, execution, and feedback in response to the expanded scale of national finances and economic uncertainty,” adding, “It is necessary to both examine the government's role and responsibility in implementing the amended National Finance Act in practice, and deepen discussions on making the budget deliberation and execution control functions more effective in line with the expanded fiscal management environment.”

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