Enhancing budget efficiencySouth Korea’s 2017 budget is expected to expand by 3.7 percent to exceed 400 trillion won ($360 billion) for the first time, according to budgetary outline put forth by the government and ruling Saenuri Party. Budgetary spending naturally would increase annually due to the growing cost to sustain a fast aging society. Fixed expenditures such as pensions for government employees and career soldiers are also ballooning.
But proposing a near 4 percent increase in budgetary spending particularly when the economy has been mired in a less than 3 percent growth is nevertheless risky. Public finance inevitably would have to play a bigger role, while both external and domestic demand remains sluggish and corporate profitability is worsening. Stimulating the economy through fiscal expansion remains a macroeconomic norm.
Still, we still need to watch ourselves in order to avoid the chronic fiscal deficit pit like Japan. Japan also spent expansively on infrastructure investments throughout two decades of stagnation, but the unnecessary roads it built are occupied by wild animals instead of cars. As a result, the Japanese today are looking at a yawning debt of 1,053.5 trillion yen ($10.5 trillion).
Korea could end up with an unmanageable debt pile if it keeps up the spending binge. The welfare budget that topped 100 trillion won in 2014 has been leaking due to heedless design and oversight. Populist budgetary plans without thorough feasibility examination such as a 15 percent hike in spending to promote youth jobs and a 20,000 won increase in allowances for war veterans appear to be aiming for the presidential election next year.
The government and legislative have been repeatedly drawing up budgetary outlines without considering the impact on year-end settlement. Due to such reckless planning, national debt will exceed 40 percent of the gross domestic product next year.
The National Assembly must provide the equilibrium. It should first pass the supplementary budget. Then it should scrutinize over next year’s budgetary plan and filter out unnecessary spending. The government must also keep political pressure ahead of the election at bay and work on enhancing efficacy in fiscal outline.
JoongAng Ilbo, Aug. 25, page 30
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