President Yoon: "We Must Escape the Illusion of Fiscal Omnipotence... Situation Has Worsened Significantly Over 5 Years"

Yoon Administration Holds First National Fiscal Strategy Meeting
"Leading by Example in the Public Sector... Government Will Tighten Its Belt First"

[Image source=Yonhap News]

[Asia Economy Reporter Ki-min Lee] On the 7th, President Yoon Suk-yeol urged, "Let us all establish a fiscal management strategy that sets the nation's finances straight and leads South Korea to a new leap forward." The implication is that, given the current complex crisis of high inflation, high interest rates, and low growth, we must break free from the illusion that budget spending will directly lead to economic growth.

In his opening remarks at the first National Fiscal Strategy Meeting of the Yoon Suk-yeol administration held at Chungbuk National University in Cheongju, Chungbuk, President Yoon emphasized, "When you look at the finances, you see the future of the nation. The future of South Korea is determined by how we manage our finances."

The Fiscal Strategy Meeting is a top-level annual government forum to discuss national fiscal issues. At this meeting, President Yoon declared that he would abolish the expansionary fiscal policies implemented during the Moon Jae-in administration.

President Yoon first stated, "During every crisis, our country's finances have served as a breakwater for the economy. This means we have maintained solid finances." However, he diagnosed, "Now, those once solid finances are in a situation where they could be pointed out as a potential risk factor to the nation's creditworthiness."

He added, "The fiscal situation has significantly deteriorated over the past five years. National debt, which was 600 trillion won in 2017, has increased by 400 trillion won and is expected to exceed 1,000 trillion won by the end of this year. Both the scale and speed of this increase are at historic highs."

In response, President Yoon emphasized that the government must lead by example, starting with tightening belts in the public sector. He expressed a willingness to improve by saying, "We need to conduct a full survey of public sector assets and sell or dispose of assets that have low relevance to the functions of institutions to an appropriate level," and "The number and salaries of public officials must also be managed under strict standards."

Furthermore, President Yoon stated, "It is time to closely examine whether fiscal policy has encroached on the private and market sectors and whether the so-called 'crowding-out effect' has operated to restrict growth," adding, "The government must ensure that taxpayers' money is not wasted through high-intensity spending restructuring without any sacred cows."

He also expressed the position that the funds secured through spending restructuring should be used to support socially vulnerable groups. President Yoon said, "The saved funds must be used where they are truly needed," and "We must provide stronger support to socially disadvantaged and vulnerable groups so they can overcome the difficult economic crisis well, using the funds created by tightening the public sector."

Additionally, he urged, "We must boldly invest in projects that discover the nation's future food sources and growth engines, such as fostering ultra-gap strategic technologies and nurturing core talents for future industries," and "We must also faithfully implement national agenda promises made to the public, such as raising soldiers' salaries, using the saved funds."

He mentioned the need to simplify and rationalize complex fiscal rules and improve the local education finance grant system. In particular, he said, "We must reflect changes in the educational environment, such as the decrease in the number of elementary and secondary students, and ensure sufficient funding for university education, including local universities," adding, "This meeting is held at Chungbuk National University. It embodies the new government's commitment that our finances should be used for youth and future generations."