Next Year's Budget Set at Trillion Won Scale with Record Spending Hike; New KRW 162 Trillion Future Response Fund Established

Next year's budget bill has been drawn up on a record-breaking scale, with total expenditures exceeding 820 trillion won.

The spending growth rate is also at an all-time high.

To address the special circumstances of total revenue surging by 200 trillion won driven by the semiconductor boom, a new Future Response Fund worth 160 trillion won will be established.

The government plans to make intensive investments to support the rebound of the potential growth rate, ease polarization, and achieve an "irreplacesble great leap forward for South Korea."

At the same time, high-intensity expenditure restructuring exceeding 100 trillion won will be carried out in parallel.

During a cabinet meeting held at the Blue House today (the 1st), the government deliberated and approved the 2027 budget bill containing these plans.

The government projected that total revenue will reach 880.8 trillion won, boosted by a substantial increase in corporate and income taxes.

This is 205.6 trillion won (30.4%) higher than this year's main budget.

National tax revenue is expected to account for the majority of the increase, rising by 194.2 trillion won (49.8%) to 584.4 trillion won.

Total expenditures rose by 93 trillion won (12.8%) to 820.9 trillion won.

This marks the first time total expenditures have entered the 800 trillion won range, and the growth rate far surpasses the record set in 2009 (10.6%).

The government is attempting a paradigm shift in national finances by establishing a Future Response Fund amounting to 162.3 trillion won.

Its primary funding source consists of "additional revenue" from large-scale tax receipts that exceed the internal tax trend line of the past 10 years.

This accounts for approximately 27.8% of next year's expected national tax revenue.

The size of the fund could grow even further, with some projections looking toward 200 trillion won.

Out of the Future Response Fund, 52.9 trillion won will be allocated to four major project accounts, and 109.4 trillion won to the general account.

Among the project accounts, 45.5 trillion won will be spent next year as project expenses across four major sectors (accounts): youth, growth engines, regional development, and education and human resources.

Through the general account, 12.5 trillion won will be used to reduce the volume of newly issued government bonds.

The entire idle reserve fund of 104.4 trillion won will be used to absorb shocks during sharp fluctuations in tax revenues or to reinforce fiscal capacity.

Minister of Planning and Budget Park Hong-keun explained, "The Future Response Fund is a strategic investment platform to utilize large-scale tax revenues for productive spending, as well as a fiscal stabilization device to enhance the efficiency of fiscal management."

The government is pushing for amendments to the National Finance Act to allow spending amounts for major items in the Future Response Fund to be changed by up to 30% pursuant to a presidential decree.

This is in the direction of expanding government discretion compared to normal cases.

The government points to the ability to respond swiftly during sudden economic shifts as an advantage of the fund.

This is because supplementary budgets take a long time to execute.

However, it remains a point of controversy that the fund has weaker monitoring and checks from the National Assembly and grants greater executive discretion than a supplementary budget.

Additionally, some opinions argue that paying off national debt should take priority when surplus funds become available.

The government will intensively invest in five major areas next year: the three mega-projects, AI, future growth engines, comprehensive support tailored to youth growth stages, addressing polarization and growth for all, and public safety and peace.

To maintain an overwhelming advantage as a semiconductor powerhouse, leap forward as a physical AI leading nation, and secure power, water, and industrial complex infrastructure, 21.3 trillion won—a 97.2% increase from this year—will be poured in.

The budget for future growth engine sectors, such as fostering advanced strategic industries and energy transition, has been set at 62.8 trillion won, up 22.7%.

A total of 43.3 trillion won will be spent on supporting the youth demographic tailored to their life cycles.

This is a 53.5% increase compared to this year.

"Growth for All" was allocated the largest portion at 117.1 trillion won.

Increased by 36.6% from this year, it introduces a regional preference principle and rolls out livelihood stabilization policies for small business owners, farmers, fishermen, and vulnerable workers.

The government will secure equipment and weapon systems for the transfer of wartime operational control and strengthen safety systems against disasters and accidents.

It will invest 38.3 trillion won (a 24.8% increase) in projects that enhance public safety and peace through strengthened national interests and supply chain diversification.

On the other hand, the government pursued high-intensity expenditure restructuring amounting to 107.6 trillion won.

Of this, 38.6 trillion won was achieved through discretionary spending cuts, such as scaling back small-scale or conventional projects, unnecessary or non-urgent operational expenses, and low-performing, similar, or overlapping project costs.

The remaining 69 trillion won comprises mandatory spending cuts, including the abolition of the link between local education finance grants and internal taxes (32.5 trillion won) and the reform of the grant calculation method (30.5 trillion won).

The government will submit next year's budget bill to the National Assembly 120 days before the start of the fiscal year (September 3).

The National Assembly will finalize next year's budget through preliminary reviews by each standing committee, a comprehensive review by the Special Committee on Budget and Accounts, and deliberation and resolution in the plenary session.

The legal deadline for the National Assembly to vote on the budget bill is 30 days before the start of the fiscal year (December 2).
 
(Photo: Yonhap News)
※ Please note: This article was translated by AI and may contain errors.