President Park Geun-hye called for the government to achieve a fiscal balance within her five-year term, stressing the need to promote efficient yet sound fiscal spending and management.
Presiding over her first meeting with ministers on the nation’s fiscal management, Park said the government needs to make fiscal reforms by first redesigning its spending so that the government can bring the national debt ratio under the mid-30 percent level of the gross domestic product.
President Park Geun-hye speaks during a meeting with ministers on the nation’s fiscal management at Cheong Wa Dae on Thursday. (Chung Hee-cho/The Korea Herald)
The nation’s debt-to-GDP ratio reached 34.8 percent in 2012, but is expected to rise to 36.2 percent this year mainly due to the government’s supplementary budget.
Korea’s first female president seeks to spend 135 trillion won over the next five years to finance the country’s welfare expansion, as pledged during her election campaign.
She added that the government needs to make spending cuts in inefficient units, but be ready to use its fiscal resources for both the unexpected and expected such as Korea’s reunification and growing pension and healthcare costs amid a rapidly aging population.
The president urged her ministers to “sacrifice” by tightening their agencies’ budget for the sake of the public’s well-being in the long term, and to root out old practices of designing its expenditure schemes from the government or the supplier’s point of view.
Of 135 trillion won for welfare finances, 53 trillion won will come from the government’s revenue sources, while the rest through budget restructuring, the government said. Of 53 trillion won, it plans to secure about 30 trillion won by “normalizing” the underground economy.
This calls for cuts in financially assisting conglomerates’ research and development since big businesses are capable on their own to fund their research projects.
Also, the government will cut spending on infrastructure development since Korea’s economy has matured and should focus on maintaining its existing infra rather than building new ones as it did during its developing stage. It will make its regional state offices lower their annual budget by around 7 percent.
It will also reduce the number of tax benefits and exemptions, without trying to upset the middle-working class and SMEs.
Other plans to achieve fiscal restructuring include developing efficient agricultural distribution systems and support mechanisms for small and medium enterprises.
The government plans to finalize its five-year plan for fiscal spending and management by the end of this month. This so-called master fiscal blueprint will provide a guideline to devising a budget for next year, as well as revising some of this year’s tax codes.
Each ministry is expected to draw up its own spending schemes by the end of June for the Finance Ministry, which will compile and devise the final budget for 2014.
These will then be submitted to the National Assembly for approval.
By Park Hyong-ki (email@example.com