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Various perspectives and expectations are intersecting regarding next year's record-breaking 820 trillion won budget proposal and the Future Response Fund. Minister of Planning and Budget Park Hong-keun joins us in the studio today (the 1st).
Q. What are the key characteristics and focus investment directions of the 2027 budget proposal?
[Park Hong-keun / Minister of Planning and Budget: You can view this budget proposal as one that makes bold and large-scale investments for the future, while actually improving fiscal soundness, thereby achieving a virtuous cycle between economic growth and public finance. Despite this, we also boldly implemented parallel expenditure restructuring. It is a budget proposal that has simultaneously achieved such fiscal innovation. There are two major pillars we aim to achieve through next year's budget. First, alongside investments in growth sectors to rebound the fading potential growth rate, we have invested in easing polarization so that the fruits of growth can be evenly distributed among the public, regions, and income brackets.]
Q. Concerns over the 162 trillion won Future Response Fund acting as the government's "slush fund"?
[Park Hong-keun / Minister of Planning and Budget: The Future Response Fund is by no means something our government can operate arbitrarily. Like general accounts and other funds, it is subject to the control and discipline of the National Budget Act and the National Assembly Act. If we need to make changes to the fund management due to necessity, it is designed to be done only within the scope permitted by the National Assembly. Furthermore, regarding ex-post modifications, meaning when we utilize excess tax revenue or make accumulations, we are required to report to the National Assembly without delay.]
Q. What is your stance on criticisms that "increased tax revenues should be used to pay off national debt"?
[Park Hong-keun / Minister of Planning and Budget: Out of this Future Response Fund, we are utilizing 12.5 trillion won next year to reduce the volume of newly issued government bonds. As a result, our national debt-to-GDP ratio next year will drop from around 51% this year to the 48% range next year. It decreases by 3.3 percentage points. Moreover, in 2030, the final year of our administration, it will drop by more than 10 percentage points compared to the original mid-term plan, which is established every five years. Therefore, you can see this budget as one that catches two birds with one stone—making our fiscal soundness much more favorable on one hand, while driving economic growth on the other.]
Q. Won't it become a fiscal burden once the semiconductor boom ends?
[Park Hong-keun / Minister of Planning and Budget: That is precisely why we are creating this Future Response Fund. Because if you put all the increased tax revenue into the general account, under single-year fiscal accounting rules, wouldn't you have to spend it all at once or pay off debt? However, by placing tax revenues brought in by such temporary super-booms into this fund, we can withdraw and use only as much as needed during boom times, and properly pay off debt or use it for critical investment areas during downturns. Isn't that how it works? So, you can understand that this fund was prepared with the intent to overcome and supplement the single-year fiscal accounting practice where we spent more when more came in and less when less came in.]
Q. The Bank of Korea raised the base interest rate... Is this policy out of sync?
[Park Hong-keun / Minister of Planning and Budget: The next-year budget proposal and investment plan we designed this time focus heavily on fostering future growth engines, namely raising the potential growth rate. Alongside this, we implemented customized support projects for vulnerable groups. In fact, didn't even the Bank of Korea Governor state that fiscal policies raising the potential growth rate are not out of sync? From that perspective, we operated in a direction that reduces aggregate demand stimulus while expanding aggregate supply, so we believe harmonious operation alongside monetary policy is possible.]
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