Ruling Party Moves to Establish 'Fiscal Rules' "Manage Deficit Ratio Within GDP -3%"

Upper Limit Regulation on Fiscal Balance
Park Dae-chul Proposes Amendment to the National Finance Act

[Image source=Yonhap News]

[Asia Economy Reporter Hyunju Lee] The ruling party proposed an amendment to the National Finance Act on the 20th that sets a legal ceiling on the national fiscal deficit ratio.

The amendment, introduced by Park Dae-chul, chairman of the National Assembly's Planning and Finance Committee and a member of the People Power Party, stipulates an upper limit on the management fiscal balance so that the annual national budget deficit ratio is controlled within -3% of GDP.

This amendment comes as South Korea's national debt ratio, which was around 36% in 2017, has steadily increased during the Moon Jae-in administration and is now approaching 50%. The national debt also surpassed 1,075 trillion won this year (based on the first supplementary budget).

Park said that with concerns about the entrenchment of large-scale fiscal deficits and the rapid increase in national debt, "fiscal control" is necessary. However, exceptions are allowed in times of crisis such as war, disasters, and economic recessions, enabling flexible responses beyond the rule.

This amendment also establishes the legal basis for the "fiscal rule" of the Yoon Suk-yeol administration, as mentioned by Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho.

Park stated, "National debt is ultimately future debt that our sons and daughters will have to repay," adding, "Due to the unusually rapid increase in national debt over the past five years, the need to stabilize it has grown, leading to the legislative initiative."