Thank the whistle-blower
The author is a columnist of JoongAng Ilbo.
Former Finance Ministry official Shin Jae-min has blown the whistle on what could be an unsuccessful window-dressing attempt on government financing. His accusations require investigation. Some of what he said sounds convincing and some bewildering. To get to the bottom of the issue, we need to hear from the source: his boss and former Finance Minister Kim Dong-yeon. Upon hearing the news of his former junior staffer’s apparent suicide attempt, Kim scolded him on Facebook. “Did you think people would believe you through your death?” he wrote. But Kim then retreated to the sidelines and has kept mum on the matter. The former finance minister, who also served as deputy prime minister for the economy, must step forward and personally answer several questions that revolve around him.
Shin claimed the Blue House ordered the Finance Ministry to issue 8.7 trillion won ($7.78 billion) in national bonds to refinance existing debt to “inflate the national debt-to-GDP ratio under the former Park Geun-hye administration.” The order allegedly came in November 2017 — about six months after President Moon Jae-in took office. The starting year is usually counted as the first year for a single-term five-year presidency. Therefore, Kim Dae-jung’s governing years range from 1998 to 2003, Roh Moo-hyun’s from 2003 to 2007 and Lee Myung-bak’s from 2008 to 2012. Park Geun-hye’s period is from 2013 to 2016 since her presidential power was suspended after she was impeached by the legislature in late 2016. Why did Shin count 2017 as part of Park’s period?
Unlike other presidents, whose terms began in February, Moon began his in May through a snap election after Park was formally removed from office after the Constitutional Court’s endorsement of her impeachment. The first four months of 2017 could thus be regarded as the responsibility of the conservative administration. Any increase in government debt could be blamed on the conservative government as its doings were stigmatized as “evil” by the new liberal administration. The Finance Ministry denies that there was any political motive behind the increase in government debt.
The Finance Ministry is traditionally conservative about public finances. A country short on resources believes that strength in public finance is one of its strongest assets. The country was able to recover from the 1990s’ financial crisis thanks to public finance integrity.
The public finance law specifically defines how to use any surplus revenues: first, use them to pay off maturing national debt; second, to shell out funds for local governments; third, to administer public fund budgets; and last, to repay principal on national bonds or loans. Kim, who was formerly an assistant minister for the budget, would have been well aware of these traditions and norms. Could he really have agreed to the idea of issuing more debt when excess tax revenue already exceeded 10 trillion won by November 2017?
Cha Young-hwan, former presidential secretary for economic policy, is said to have talked to the director-general and director of the Finance Ministry’s budgetary department over the phone. He could have directly discussed the matter with the finance minister given the power the Blue House had at the time. Yet he chose to nag working-level officials. Does that mean Kim tried to dump the responsibility on working-level officials?
Shin said he heard the debt issue came from a “political judgment” or an order from a higher level. On Facebook, former Finance Minister Kim said the issue should be regarded in a “broader context.”
Shin’s whistle-blowing has put public finances in a new light. Budgeting could come under greater public scrutiny. That alone is a meaningful gain from Shin’s whistle-blowing.
JoongAng Ilbo, Jan. 10, Page 30