Finance Ministry torn between restoring fiscal balance and welfare for aging KoreaWill the government continue deleveraging or spend more for better welfare?
Cornered into juggling the two contradictory urges, the Finance Ministry spoke of its plans and challenges ahead in setting a long-term fiscal policy.
Koo Bon-jin, chief of the ministry’s public finances, said his team will soon lay out a fresh fiscal plan looking to 2020 and beyond, seeking ways to sustain budget balance on the back of ever-growing pressure for more welfare spending.
“We are brainstorming for a long-term fiscal policy. The medium-term fiscal plan was released by our budget department earlier, but this one will address the complex public money demand for the middle class and the social inequality,” Koo said in an annual seminar with reporters.
His comments came in the middle of a debate between reporters and senior Finance Ministry officials where the consensus was that the citizens strongly demand a more comprehensive, lasting social welfare. Officials recognized that this poses challenges to the ministry tasked to restrain spending to meet its budget balancing goal by next year. The Lee Myung-bak administration has targeted spending less than it makes until it achieves a budget balance in 2013. The country currently expects the deficit to come in at 2 percent of the gross domestic product for this year.
Korea has been deleveraging since it took out a package of expensive loans from the International Monetary Fund during the 1997-8 Asian Financial Crisis. Seoul’s support for exporters has been focusing on cost-cutting and deregulation, and such export-driven growth has led to a wider gap between large businesses and the rest of society.
Deputy Finance Minister Kang Ho-in said civic activist Park Won-soon winning the Seoul mayoral race last week is a sign that citizens are prioritizing welfare issues for their education, retirement and medical support.
“I agree that the country needs a fundamental shift in its economic model. The government needs to better protect temporary workers and jobless youth which, in part, have been produced from the fast deleveraging process,” Kang told reporters.
“We’re working on our reform and Seoul’s campaign for shared growth is one example, but such system cannot be built in a day,” Kang told reporters.
The Finance Ministry in September proposed to increase its spending next year by 5.5 percent to 326.1 trillion won ($286.2 billion), prioritizing job creation and fiscal soundness to protect the country’s economy from the European sovereign debt crisis.
By Cynthia J. Kim (
cynthiak@heraldcorp.com)
