The Finance Ministry appeared to be seeking to improve the nation’s fiscal balance next year by slashing unnecessary expenditure and reducing the number of government projects.
The Ministry of Strategy and Finance on Tuesday called upon government agencies and ministries to follow the principles of pay as you go, also known as “paygo” budgeting rules, to help counter worsening fiscal deficits and debt ratios.
The guidelines were approved on the same day at a Cabinet meeting in which the 2015 government expenditure was discussed.
Under the guidelines, all new spending by government offices must be balanced by spending cuts or offset with revenue increases.
“There will be no additional spending without a way to finance such spending,” the ministry said in its report to the Cabinet meeting earlier in the day.
The announcement came in the wake of reports that the country’s budget shortfall widened to a record high in 2013, due mainly to front-loaded spending and decreased tax revenue.
The fiscal account, excluding social security funds, posted a 21.1 trillion won deficit ($20.3 billion), up 3.7 trillion won, the largest since 2009, according to the ministry data.
The ministry said earlier it aims to achieve a near fiscal balance before President Park Geun-hye’s five-year terms ends in 2017, reducing the country’s fiscal deficit to 0.4 percent of its gross domestic product by then from an estimated 1.8 percent in 2013.
Plans include a cut in the total number of government projects.
“We aim to reduce the government agencies’ projects by nearly 10 percent or 600 projects over the next three years, by integrating or combining, especially overlapping projects,” an official from the ministry said.
Under the 2015 budget plan approved at the Cabinet meeting Tuesday, the ministry also pledged to continue tightening its grip on spending.
In particular, it hinted at further spending cuts for social overhead capital projects, such as construction of transportation, communication and power facilities, to better manage its budget next year. Instead, the ministry said it would stimulate investment in facilities with private participation.
The ministry, however, pledged to continue to strengthen its spending in several necessary areas, such as the welfare sector.
The ministry announced earlier that it would push to expand social welfare benefits for a broader segment of the population as promised by President Park Geun-hye during her presidential campaign.
Each government ministry will be required to submit its 2015 budget plans to the Finance Ministry by June 13. The Finance Ministry will then submit a final budget request to the National Assembly by Sept. 23, it said.
By Oh Kyu-wook and news reports