[2022 Budget Plan] Next Year's Local Budgets Doubled... 52 Trillion Won Distributed for Fiscal Decentralization and SOC Ahead of Presidential Election

[Image source=Yonhap News]

[Sejong=Asia Economy Reporter Moon Chaeseok] The government will invest 52.6 trillion won in the next year to resolve the polarization between local areas and the metropolitan area. This amount is more than double the 24.9 trillion won from last year, with nearly half of it, 24.7 trillion won, allocated to expanding local finances. Additionally, the budget for social overhead capital (SOC) is set at a record high of 27.5 trillion won. There are criticisms that this is a populist budget aimed at next year's presidential election.

According to the 2022 budget plan announced by the government on the 31st, the Ministry of Economy and Finance has newly established a special grant for local extinction and plans to invest 1 trillion won annually for 10 years, including 750 billion won next year. Along with this, a total of 2 trillion won will be newly secured as local financial resources, including a net increase of 1 trillion won in local consumption tax. The grant will be used for mid- to long-term investments in transportation, housing, and communication facilities within regional hubs.

Ando-geol, the 2nd Vice Minister of the Ministry of Economy and Finance, said at a recent pre-budget briefing, "We are paying considerable attention to balanced regional development," adding, "To this end, fiscal decentralization and financial reinforcement have been reflected in next year's budget."

The government combined 11.1 trillion won in education grants and 11.6 trillion won in local tax revenues, totaling 22.7 trillion won, to create a budget for strengthening local finances.

The budget for expanding balanced development infrastructure will increase to 12.1 trillion won next year, investing in projects such as the single-track electrification of the Donghae Line, the commercial vehicle industry in Jeonbuk, and the development of the fisheries food export complex in Jeonnam. The regional balanced New Deal budget will expand from 10.8 trillion won to 13.1 trillion won. An investment of 84 billion won will be made in the five green convergence cluster projects currently being established in Gyeongbuk, Busan, Incheon, Gwangju, and Chuncheon. The budget for responding to local extinction will increase from 2.4 trillion won to 2.7 trillion won. A budget of 240 billion won will be invested in youth-led local job projects to create 26,000 jobs.

Separately, the government plans to invest a record-high 27.5 trillion won in SOC, a 3.8% increase from last year. The budgets for roads (8.4 trillion won) and railroads/urban railroads (8.3 trillion won) account for 60.7% of the total.

Experts interpret the government's decision to more than double the local finance budget ahead of next year's presidential and local elections as a move heavily influenced by election considerations.

Professor Kim Taegi of Dankook University's Department of Economics said, "Expanding local finances is a policy that could have been implemented in previous years as well, but it is hard to find a clear reason to suddenly double it in an election year," adding, "There is also a local election next year besides the presidential election, so it is enough to suspect that the budget was excessively increased as an 'election budget' with election considerations in mind."