President Park Geun-hye’s administration says it plans to balance the national budget in 2017, the final year of her governance. But it is more optimistic in its fiscal outlook than warranted, its critics say.
Most notable among the critics is the National Assembly Budget Office, which says the demand for spending on welfare is soaring while tax revenues are not growing fast enough to meet it. If the administration has an earnest desire to balance the budget by the target year, the office says, it will have to put spending under tight control and drastically increase tax revenues.
But that is easier said than done, as witnessed in the latest budgeting cases.
When it submitted a supplementary budget bill to the legislature during the first half of this year, the administration assumed the tax revenues for the entire 2013 fiscal year would amount to 210.4 trillion won. But the actual revenue will be 7 trillion won to 8 trillion won short of that amount, says the budget office.
The office said the 2014 fiscal year will be little better, adding that the tax revenues will fall short of the target, or 218.5 trillion won, by 4.6 trillion won. It expects this trend will continue into 2017 unless the Park administration tightens its belt, puts an end to many tax favors to businesses and take other action to increase tax revenues.
One area where the administration can wield the ax is infrastructure construction. The administration is committed to 23 multi-year, big-ticket infrastructure projects whose economic benefits are called into question by feasibility studies that have been conducted since 2003, the budget office says. Together their total construction costs are estimated at 11 trillion won.
The money that has been spent on those projects amounts to 330 billion won. True, the amount is not so large when compared with the total construction costs. But the problem is that construction on many of the projects may go into full swing anytime for political purposes, given that most of them are pork-barrel projects.
The administration will have to stop funding to all of these kinds of infrastructure projects if it is committed to minimizing waste and promoting fiscal soundness, as it has repeatedly promised in the past. Otherwise many will suspect that the incumbent administration, instead of balancing the budget in the final year of Park’s governance, intends to pass the buck on to its immediate successor. It must keep itself from following the footsteps of its predecessor, which is accused of squandering so much money on such infrastructure projects as the four-river reclamation project.
