[Asia Economy Reporter Jang Sehee] As the Ministry of Economy and Finance is set to announce fiscal rules this week, attention is focused on whether a ceiling on the national debt-to-GDP ratio will be established.
According to multiple officials from the Ministry of Economy and Finance on the 27th, the government is discussing the form of the fiscal rules, whether as laws or guidelines. Fiscal rules set legal limits on government spending, fiscal balance, and national debt to prevent arbitrary increases.
It is expected that specific details will be included in enforcement ordinances, with exception clauses allowing flexibility during national crises such as the novel coronavirus disease (COVID-19).
Earlier, Deputy Prime Minister and Minister of Economy and Finance Hong Nam-ki emphasized flexibility, stating, "If fiscal rules are rigid and prevent the fiscal system from playing its role in situations like the current COVID-19 crisis, then the rules become constraints."
Democratic Party lawmaker Ki Dong-min also said, "While thoroughly reviewing and studying fiscal rules, the Ministry of Economy and Finance needs to be cautious considering the timing and other factors."
In political circles, it is considered highly likely that the fiscal rules will be finalized and announced at the Cabinet meeting on the 29th, just before the Chuseok holiday. However, there are also forecasts that strict fiscal rules will be difficult to introduce due to opposition from the ruling party.
Meanwhile, advanced countries adopt fiscal rules that set ceilings. The European Union (EU) recommends keeping the national debt ratio below 60% of GDP and the structural deficit below 3% of GDP. Germany specifies in its constitution that new debt must not exceed 0.35% of GDP.
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