Hong Nam-ki Responds to Criticism of 556 Trillion Super Budget: "Not to the Extent of Fiscal Crisis or Default"

by Lim Chunhan

Published 05 Nov.2020 17:56(KST)

[Image source=Yonhap News]

[Asia Economy Reporter Lim Chun-han] Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance, stated on the 5th regarding next year's budget, which has been organized at a record high of 556 trillion won, "An 8.5% increase compared to this year does not mean a fiscal crisis or a sovereign debt default."

On the same day, during the National Assembly Budget and Accounts Committee's comprehensive policy inquiry, Hong responded to Kim Han-jung, a member of the Democratic Party of Korea, who pointed out that "there are criticisms calling it a 'super budget' even though it does not seem excessive," by saying, "The government has organized and submitted it to the National Assembly to ensure that the fiscal role can be fulfilled to the maximum extent within a manageable range."

Regarding opposition party concerns about fiscal soundness, Representative Kim said, "Expansionary fiscal policy is a policy adopted by most OECD countries, and in terms of speed and scale, we are actually more moderate."

Hong Nam-ki agreed, stating, "Although general government debt (D2) increased by about 7.0 percentage points compared to last year through four supplementary budgets this year, OECD countries saw an average increase of 15 to 20 percentage points. Despite this, our growth rate forecast is higher than that of any OECD country."

Jeong Chan-min, a member of the People Power Party, criticized, "Budgets should be prepared based on revenue, but this year, value-added tax revenue is about 4 trillion won less than expected, and the country's treasury situation is rapidly deteriorating," adding, "There is also a lack of measures for national debt, exposing us significantly to the possibility of a fiscal crisis."

Prime Minister Jeong Sye-kyun rebutted, saying, "We made the decision on expansionary fiscal policy based on the judgment that now is the time when a hoe can stop what a spatula cannot," and added, "We also established fiscal rules as part of the effort to manage finances meticulously."