Gwangyang City: "'Fiscal Crisis' Claims Are Excessive... Operating Within Legal Fiscal Management"

"Exaggerated Expressions Only Fuel Fiscal Anxiety"

Gwangyang City, Jeollanam-do, recently addressed claims of a fiscal crisis raised during the recent election campaign, stating, "Some of these points do not fully reflect the structure of the local finance system and the policy environment at the time." The city emphasized the need to accurately explain the actual fiscal situation to its citizens.

Regarding the integrated fiscal stabilization fund, which has become the biggest point of contention, the city explained, "The fund has not disappeared or been depleted." The integrated fiscal stabilization fund is a system established under the Basic Act on the Management of Local Government Funds, which enables the integrated management of surplus resources from various funds for efficient financial operations and allows for the deposit or custody of these resources into the general account if there is a shortage.

A view of the Gwangyang City Hall.

The city clarified that the controversial 25.7 billion won is also currently deposited in the general account and is managed as an internal deposit and custody relationship within the accounting system. The city stressed that these resources are clearly recorded in the accounting books, and every use of the fund requires the approval of the city council prior to use, as well as annual settlement inspections and council approval after use.

The city stated, "Expressions such as 'it exists only on paper' or 'the emergency fund was withdrawn and spent' can cause citizens to feel excessive fiscal anxiety compared to the actual situation," adding, "It is inappropriate to view legitimate fiscal management as if it signifies fiscal insolvency."

With regard to the use of the 21.9 billion won reserve for the Resource Circulation Complex, which was deposited into the general account in 2021, the city maintains that the COVID-19 situation at the time should also be taken into account.

In 2021, as the prolonged COVID-19 pandemic exacerbated local economic downturn and threatened citizens’ livelihoods, the city provided emergency disaster relief funds to all citizens, following approval from the city council. In this process, the city prioritized the use of funds allocated for long-term projects scheduled through 2030, and then chose to replenish them from the general account over several years.

The city stated, "At that time in 2021, local governments nationwide were mobilizing all available resources to respond to the emergency," and explained, "It was a policy decision based on the urgency and public interest of stabilizing citizens' livelihoods."

The city also countered criticism of the issuance of 42 billion won in local bonds, arguing that it should not be viewed solely as an increase in debt.

Gwangyang City explained that, due to the government's recent large-scale national tax revenue shortfall, local allocation tax funds have been drastically cut nationwide. The city itself was affected by a reduction of 32.1 billion won in 2023 and 9.5 billion won in 2024, resulting in a total shortfall of 41.6 billion won in allocation tax grants.

The city stated, "If major social overhead capital (SOC) projects and residents’ long-awaited projects that have already begun construction were to be halted, there would be concerns about delays, penalties for late completion, and increased construction costs, leading to even greater fiscal losses and inconvenience for citizens." The city added, "Completing these projects on schedule was, in fact, a decision intended to reduce the long-term fiscal burden."

The city further noted, "The current scale of local bonds is sufficiently manageable, considering the city’s overall fiscal scale and debt ratio."

The city acknowledged, "It is true that financial conditions have become more challenging than in the past, but it is an excessive interpretation to equate this directly to 'fiscal collapse' or 'structural insolvency.'" The city stressed, "Policy decisions made to protect citizens amid the COVID-19 and national tax revenue crises should not be distorted negatively." The city concluded, "We will continue to maintain sound fiscal management while striking a balance between stabilizing citizens’ livelihoods and making future-oriented investments."

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