[The Budget War Begins] The 800 Trillion Won Budget Battle Heats Up Ahead of Local Elections

Local Elections and Budget Drafting Season Overlap
Political Interests Intertwined
Fierce Competition Among Local Governments for Central Funding

The key themes of next year’s budget proposal can be summarized as “expansionary fiscal policy,” “expenditure restructuring,” and the “race among local governments to secure central government funding.” Despite a record-high budget of 800 trillion won, an unprecedented expenditure restructuring of 50 trillion won is expected, raising concerns that project budgets for local governments will face freezes or cuts. In particular, this year, the government’s budget drafting season coincides with the June 3 local elections, intertwining political interests and intensifying the competition to secure budget allocations.

On May 12, President Lee Jaemyung stated at a cabinet meeting held at the Blue House, “While increasing the total budget is important, improving efficiency can have the same effect as increasing the total amount,” calling for a review of low-efficiency projects. He added, “Last year, we were not able to properly formulate the budget,” emphasizing, “We must approach this year as both the first and last opportunity.” Previously, Minister of Planning and Budget Park Honggeun also stressed, “To address rising mandatory expenditures and secure resources for key government initiatives, an unprecedentedly rigorous expenditure restructuring is necessary.” Minister Park set a goal of “reducing fiscal expenditures by 15%, cutting mandatory spending by 10%, and eliminating 10% of projects,” and instructed, “Projects evaluated as requiring abolition through performance assessments must in fact be discontinued.”

With the government officially declaring a sweeping expenditure restructuring to manage the swollen fiscal scale alongside an active fiscal policy, competition among central ministries and local governments to secure budget allocations is heating up. According to the National Fiscal Management Plan, total expenditures next year are projected at approximately 764.4 trillion won, a 5% increase from this year’s original budget of 728 trillion won. With an additional supplementary budget of 26.2 trillion won already added this year, if the 5% growth rate applies to this year’s total expenditure of 754 trillion won, next year’s budget could reach 792 trillion won, approaching the 800 trillion mark. Meanwhile, the government aims to secure roughly 50 trillion won through expenditure restructuring by reducing discretionary spending by 15%, cutting mandatory spending by 10%, and eliminating 10% of projects.

This year, with local elections also taking place, local governments are moving even more quickly. The Ministry of Planning has already signaled that in the third year of the Lee Jaemyung administration, the budget will be heavily allocated to local-led growth, a core government initiative. Visits by local government leaders and civil servants to the Ministry’s building within the Government Complex Sejong have noticeably increased as they seek cooperation on central government funding, aiming to include regional priority projects in the budget to be drafted at the end of this month. On April 27, Lee Sangcheol, acting head of Boseong County, met with Park Changhwan, Director General for Budget Coordination, to request 10.9 billion won in central government support. Lee Jeongwoo, acting head of Jangsu County, also visited the Ministry to propose that a preliminary feasibility study be conducted on the 66.7 billion won National Route 26 two-lane improvement project.

High-profile metropolitan mayors have even invited senior budget officials for direct discussions on budget cooperation. Jo Yongbeom, Director General of Budget at the Ministry of Planning and Budget, recently visited field sites in regions such as Haenam, South Jeolla Province, and on May 7-8, held the “2026 Local Finance Council” at the National Sejong Library, conducting one-on-one tailored consultations with 17 metropolitan cities and provinces. According to the Ministry, detailed discussions on local issues and improvement directions were held in relay format, starting with interviews with bureau and division heads, followed by working-level consultations among department managers. Each city and province requested large-scale central government funding, focusing on future industries, wide-area transportation networks, AI, semiconductors, and energy projects. Starting May 12, the Ministry also resumed its “on-site budget briefings” with other ministries, beginning with the Ministry of Trade, Industry and Energy—this is the first time in five years, since 2021.

During his visit to the Ministry of Trade, Industry and Energy, Director General Jo discussed the establishment of a special semiconductor fund and strategies for developing regional growth hubs, stating, “We will not simply review budgets; we will also support ministries so that their key projects can be planned in a feasible direction.” In the afternoon, he visited the Ministry of Science and ICT, and on the following day, May 13, he will visit the Ministry of Climate, Energy and Environment, and the Ministry of Health and Welfare to discuss the transition to artificial intelligence (AI), investments in carbon neutrality such as K-GX, and measures to address low birth rates and close welfare gaps. The Ministry of Planning and Budget plans to visit 30 ministries by May 19 to discuss key investment areas, expenditure efficiency measures, and preferential projects for local governments.