[Exclusive] Ministry of Economy and Finance Budget Office Cuts Tens of Percent Over Budget Limit... Unchecked Authority

Looking into Government Ministries' Budget Requests
Rural Development Administration Cut Back After Exceeding Limits
Ministry of Education Promoted 'Increase'... Actually Undergoing Major Restructuring

In the budget requests examined by Asia Economy, the absolute power held by the Budget Office of the Ministry of Economy and Finance (MOEF) was fully revealed. It was common for the Budget Office to completely reject departments' requests for increased funding or to abolish major projects that did not align with the MOEF’s policy direction.

The budget requests confirmed by this publication span from 2015 to 2024, totaling 23 cases received by the MOEF from other government ministries. By reviewing these budget requests, one can glimpse the previously unknown details, scale, and methods of the MOEF’s budget restructuring. Although the MOEF claims these budget requests are strictly confidential and refuses to disclose them, in reality, they are buried in a vast pile of documents and difficult to find, but anyone can verify them.

The intense restructuring by the MOEF Budget Office is reflected in the 2024 budget request of the Rural Development Administration (RDA). The MOEF instructed the RDA to set its budget at 1.2841 trillion KRW for this year. This was a directive to limit the increase to 2.3% from the 2023 budget of 1.2547 trillion KRW. However, the RDA submitted a budget request of 1.3862 trillion KRW, far exceeding this limit. This is a so-called ‘inflated budget’ submitted in anticipation of cuts by the MOEF.

Nevertheless, the MOEF sharply cut the RDA’s budget for exceeding the limit. The budget proposal publicly released by the RDA in September last year was 1.0855 trillion KRW, a 13.5% reduction from the previous year’s 1.2547 trillion KRW. This means the RDA’s request for an increase of 130.8 billion KRW (10.4%) was met with a cut of 300.7 billion KRW.

In particular, the research and development (R&D) budget took a direct hit. The RDA’s R&D budget last year was 761.2 billion KRW. The initially proposed spending limit for the R&D sector was slightly reduced by 7.6 billion KRW to 753.6 billion KRW. However, contrary to the MOEF’s directive, the RDA requested an increase of 35.5 billion KRW. Large-scale increase requests followed, such as the establishment of the Allium Vegetable (onion, garlic, green onion) Research Institute (+858.9%) and the foundation of a Fruit Digital Agriculture Demonstration Research Institute (+462.1%). In response, the MOEF carried out a restructuring of 187.5 billion KRW and set the budget at 573.7 billion KRW, significantly lower than the spending limit it had initially proposed.

Summary table of the government budget proposal released by the Ministry of Education in 2021. The total expenditure amount is shown as 76.3332 trillion KRW, but the actual budget requested by the Ministry of Education to the Ministry of Economy and Finance was 77.7478 trillion KRW. Photo by Ministry of Education

Departments that received budget increases also could not avoid bold restructuring. On September 1, 2020, the government announced that the Ministry of Education’s budget for the following year would be 76.3332 trillion KRW. The government emphasized that this was an increase of 60.15 billion KRW (0.79%) compared to the third supplementary budget of 75.7371 trillion KRW at the time. However, based on the main budget (77.3871 trillion KRW), it was actually a decrease of 1.0539 trillion KRW (1.36%), but the government only provided explanations about the ‘increased budget’ for full implementation of free high school education across all grades and strengthening university competitiveness.

However, upon reviewing the Ministry of Education’s 2021 budget request, it was found that the ministry initially requested 77.7478 trillion KRW. This was an increase of 2.0107 trillion KRW compared to the supplementary budget and 360.7 billion KRW compared to the main budget. The MOEF made several rounds of total budget cuts. The MOEF reduced the Ministry of Education’s budget to 77.4194 trillion KRW by cutting 1.8 trillion KRW from mandatory expenditures as well as discretionary spending. Subsequently, citing unnecessary reasons, several education projects were eliminated, and the budget was finalized at 76.3332 trillion KRW. The total ‘reduced budget’ amounted to 1.4146 trillion KRW, effectively nullifying all of the Ministry of Education’s requests for increased funding.

The Ministry of Education’s major cuts were also in the R&D budget. Among the R&D sectors, the ministry requested 1.0951 trillion KRW for the University Innovation Support budget, but the MOEF drastically cut this to 1.0056 trillion KRW. The cut of 89.5 billion KRW was the largest among detailed projects. The Industry-Academia-Research Cooperation Advancement Support R&D was adjusted from 464.4 billion KRW to 429.9 billion KRW, and the education and human resource development project ‘BK21 Plus Project’ also shrank by 10.8 billion KRW from the initially requested 437.7 billion KRW to 426.9 billion KRW.

It was also possible to confirm which projects the government reduced before the MOEF’s review. This year, the Ministry of Culture, Sports and Tourism’s government budget was announced at 6.9796 trillion KRW, an increase of 238.8 billion KRW from the previous year. The ministry’s initial request was 7.0916 trillion KRW, an increase of 350.8 billion KRW. Of the requested increase, 523.7 billion KRW came from budget sectors such as the general account and the Special Account for Balanced National Development. To lower the rate of increase, the ministry preemptively cut funds. The total cut amounted to 172.9 billion KRW, including the Film Development Fund (-3.2 billion KRW), Tourism Promotion and Development Fund (-41.3 billion KRW), and National Sports Promotion Fund (-170 billion KRW).