Hong Nam-ki Directly Explains Fiscal Rules... "They Are Never Lenient"

[Image source=Yonhap News]

[Sejong=Asia Economy Reporter Kim Hyunjung] Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance, has taken to directly posting lecture videos to promote the 'Korean-style Fiscal Rules' he prepared to ensure fiscal soundness to the public.

On the 24th, Deputy Prime Minister Hong uploaded five videos titled "Deputy Prime Minister's Direct Lecture Series - Mastering Korean-style Fiscal Rules" on the Ministry of Economy and Finance's YouTube channel. This is the second video series following the one posted on the 29th of last month diagnosing domestic and international economic conditions.

In the videos, he emphasized, "Currently, fiscal soundness is relatively good compared to major countries, but considering the rapid increase in national debt going forward, it is necessary to manage this," adding, "The fiscal rules were designed to catch two rabbits at once: fiscal responsibility and fiscal soundness."

He thoroughly refuted criticisms and controversies surrounding the fiscal rules. Regarding the criticism that the formula is somewhat loose, he stated, "We simulated until 2024, and when only the current forecast figures are input, considering results that somewhat exceed the rules, it cannot be said to be loose," stressing, "On the contrary, it is judged to be relatively strict."

Regarding the use of the integrated fiscal balance instead of the management fiscal balance as the fiscal balance standard, he explained, "The internationally accepted balance is the integrated fiscal balance," adding, "Since the management fiscal balance moves in almost the same direction with a consistent gap, the internationally accepted integrated fiscal balance was presented as the standard."

He further said, "During the process of experiencing the COVID-19 crisis, the revenue base has already weakened, and expenditure needs have greatly increased, so the mid- to long-term preparatory process for compliance with the rules is by no means easy," adding, "We will strictly operate the fiscal rules to expand fiscal sustainability, and in the meantime, the fiscal rules will serve as a lighthouse."

Regarding exceptional measures, he said, "We will set strict conditions to prevent arbitrary operation," and added, "In the event of a severe national crisis at the level of the COVID-19 crisis, exemptions will be granted, and relaxations will be applied when certain indicators such as GDP or employment meet specific conditions." He also clearly stated that through consultations with experts and the National Assembly, the authority to apply related exceptions will not be abused.

He also mentioned that the fiscal rules formula could be included in the law rather than the previously announced enforcement decree. Deputy Prime Minister Hong said, "Since opinions have been raised that it is desirable to reflect it in the law for strict operation, we will fully consult with the National Assembly and negotiate to have it reflected in appropriate legislation."