SEOUL– South Korea’s finance ministry said Tuesday it will push to enforce tighter fiscal rules immediately upon their enactment, which call for capping the deficit to 3 percent of the country’s gross domestic product (GDP).
The move came in line with the Yoon Suk-yeol government’s belt-tightening policy as part of effort to improve the country’s financial soundness following years of expansionary fiscal spending.
During the emergency economic ministers’ meeting, the government decided to push for the introduction of the fiscal rules, which limit the fiscal deficit to 3 percent of GDP, and to implement the rules as soon as they are enacted into law, according to the ministry.
If the debt-to-GDP ratio exceeds 60 percent, the government shall lower the deficit to 2 percent or less.
Exceptions to the rules will only be in the case of war, massive disasters or an economic recession.
If the rules pass the National Assembly during the regular parliamentary session set to kick off next week, they will begin to be applied to the 2024 budget, the ministry added.
The previous government proposed a three-year grace period when it sought to devise such tight fiscal rules in 2020.
This year’s debt-to-GDP ratio is likely to hit 49.7 percent.
“The introduction of the regulation that controls and manages the total amount of the budget is necessary to ensure the financial soundness,” Finance Minister Choo Kyung-ho said during the meeting. “We will work closely with the National Assembly for its swift enactment.”
The country saw the national debt grow more than 400 trillion won (US$291.04 billion), or some 62 percent, over the past five years, according to the ministry.
Last month, the government proposed a budget of 639 trillion won for next year, up 5.2 percent from this year’s budget. It would mark the slowest spending growth in six years in line with its belt-tightening policy.
Source: Yonhap News Agency