Skepticism is growing about the prospects of South Korea meeting its minimum target growth rate of 2 percent this year, as fiscal spending by the state budget headquarters is proceeding much more slowly than expected.
According to data released by Rep. Park Myung-jae of the main opposition Liberty Korea Party, who sits on the parliamentary Strategy and Finance Committee, the Ministry of Economy and Finance had spent 12.83 trillion won ($10.8 billion) as of the end of October -- 59.9 percent of its 21.4 trillion won annual budget. The given amount includes the supplementary budget.
The figure places the ministry at No. 51 out of the 54 central government agencies in terms of how fast they are executing their budgets. Apart from the Finance Ministry, the only agencies that executed their budgets more slowly were the Ministry of Unification, the Public Procurement Service, and a special investigation committee established to look into the 2014 Sewol Ferry sinking and another case that emerged in 2011, when it came to the public’s attention that certain humidifier sanitizers were causing illness and death.
For all 54 bodies -- ministries, the National Assembly, the Presidential Security Service and others -- total spending to date stood at 405.68 trillion won, or 84.4 percent of a 480.86 trillion won budget. But it appears that a few overachieving agencies raised the average, as 36 spent less than the average percentage of their budgets.
“It is contradictory that the Finance Ministry would encourage other government agencies to swiftly execute their budgets, while its own figure lingers low,” said Rep. Park.
Expansionary fiscal spending is deemed a key strategy for Asia’s fourth-largest economy to pull its way out of sluggish growth and achieve a growth rate of 2 percent or more this year. Last week, the Bank of Korea lowered its annual growth outlook to 2 percent, down 0.2 percentage point from its previous estimate.
Also, BOK data showed Tuesday that government spending stood at 1.4 percent during the third quarter, down from the 2.2 percent recorded in the previous quarter.
The Finance Ministry rebutted the criticism, citing its unique status as the government’s central fiscal control tower.
“(The Finance Ministry’s budget) includes comprehensive government management costs such as public capital funds and reserve funds, which altogether account for 76.6 percent of the total,” it said.
“There are limits to executing (pangovernmental projects) on the ministry’s own discretion.”
The public capital management fund, for instance, has remained inactive this year because low interest rates have decreased interest payments on government bonds, it explained.
Also, the government is legally required to hold funds in reserve for unexpected contingencies such as natural disasters, the ministry added.
“It is the government’s given duty to fully execute the expenditure budget, which is based on the people’s tax and has been confirmed by the legislature,” the ministry said.
“We will continue to encourage individual departments to spend their fiscal resources in compliance with the law and related regulations.”
By Bae Hyun-jung (email@example.com)