The government has set the budget for next year to 639 trillion won, up 5.2 percent from this year. The 5% increase in the main budget is significantly lower than the average annual increase rate of 8.7% during the five years of the Moon Jae-in administration. In particular, if you include the two additional budgets this year, the budget for next year will be 6% smaller than this year. The government plans to reduce the budget deficit from 5% this year to 2.6% next year. Although it has not yet been enacted into law, the government plans to preemptively apply fiscal rules to control the managed fiscal balance within 3% of gross domestic product (GDP). The government’s will to completely change the management of the country’s livelihood from ‘extended finance’ to ‘sound finance’ is evident.
In fact, it is easy to say, but it is not easy to put it into action as it is the first time in 13 years to make a budget that is lower than the previous year. This is because no government is unaware that the expansionary fiscal, which puts in as much money as possible and sows cash, helps increase approval ratings and win votes rather than austerity. It is common to spend as much as you can once and leave the fiscal consolidation to the next government. This was also the case with the Moon Jae-in government. A total of 10 supplementary budgets were made, including the application of disaster aid for all citizens twice. Compared to the Lee Myung-bak and Park Geun-hye administrations, only two and three times, respectively. There was a variable called Corona 19, but it was too much to make the national debt ‘Cheonjo-guk’ by increasing the national debt by 400 trillion won during the five years in power. Many countries around the world began to tighten fiscal measures due to rising inflation risks, but the Moon administration insisted on fiscal-led growth until the end of his term. Even when the Bank of Korea began aggressive monetary tightening to catch inflation, the government released more money to fuel inflationary instability. Monetary and fiscal policies were out of sync, making it difficult to expect policy effects. Now that we have shifted to a sound fiscal policy in line with monetary tightening, we are on the right track. In particular, as the trade deficit continues for the fifth month and short-term external debt is also on the rise, securing fiscal soundness, one of the main pillars supporting the national credibility, has become more important. You need to start cutting expenses on unnecessary items. In addition, the legislative fiscal rules that enforce fiscal soundness must be swiftly established so that sound finances can be firmly established.
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