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Democratic Party’s plan to split the Finance Ministry needs careful deliberation

Published: 30 Apr. 2025, 00:00

Ministry of Economy and Finance building at the government complex in Sejong. [YONHAP]

Following the confirmation of its presidential candidate, discussions over reorganizing Korea’s economic ministries are growing within the Democratic Party(DP). Several ideas are gaining traction: separating the budgeting function from the Ministry of Economy and Finance (MOEF); merging MOEF’s international finance division with the Financial Services Commission’s domestic finance role; integrating the Financial Services Commission with the Financial Supervisory Service’s regulatory functions; and separating the energy sector from the Ministry of Trade, Industry and Energy — or splitting the ministry’s three divisions of industry, trade and energy into independent entities. Among these, the proposal to break up the Finance Ministry is drawing the most attention. The DP has already submitted a bill to amend the Government Organization Act to separate the planning and budgeting functions into a new Planning and Budget Office, and the remaining fiscal functions into a Ministry of Finance and Economy. Just recently, it also hosted a forum to discuss economic ministry reforms.

Given that the new administration must begin the day after the election without the benefit of a presidential transition committee, it is understandable for the DP — with a strong presidential contender — to prepare a blueprint for reorganizing government ministries in advance. The idea of removing the budgetary function from the Finance Ministry is certainly open for consideration. Previous Democratic governments under presidents Kim Dae-jung and Roh Moo-hyun pursued similar efforts.

However, several concerns arise. Most critically, it would be problematic if the move to split the ministry were motivated by a desire to “discipline” the Finance Ministry, particularly given its past friction with DP presidential candidate Lee Jae-myung. During his term as Gyeonggi governor in 2021, Lee criticized then-Deputy Prime Minister and Finance Minister Hong Nam-ki of the Moon Jae-in administration as a miser. Then-Prime Minister Chung Sye-kyun also lashed out at the Finance Ministry, saying, “Is this country being run by the Ministry of Economy and Finance?” Lee attacked the ministry for resisting the legislation of small business compensation measures, branding it an obstacle to reform. Even on the day he was confirmed as the DP’s presidential nominee, Lee remarked, “I largely agree with the criticism that the Finance Ministry acts like the king among government agencies.” The Finance Ministry had also consistently expressed skepticism toward one of Lee’s favored policies: support for local currency programs.

Currently, there are discussions about placing a new Planning and Budget Office under the Prime Minister’s Office, or under the presidential office following the U.S. model. However, transferring budgetary authority to the presidential office raises concerns about the "politicization of budgeting," making fiscal priorities more vulnerable to political winds.

The 2+2 trade negotiation table between the Korean and United States government begin on April 24 in Washington. [MINISTRY OF ECONOMY AND FINANCE]

It is crucial to examine why the budgeting function was split off and recombined in the past. Splits emphasized checks and balances, while mergers sought to bolster policy effectiveness, efficiency and fiscal responsibility. If the DP is serious about separating the budgeting function again, it must also explain how it would prevent weakened policy coordination and a greater risk of fiscal waste.

Given the tight timeline after the presidential election and before the regular session of the National Assembly, the new government will barely have time to prepare a budget proposal and tax code revisions. Swift responses will also be needed to handle U.S. tariff negotiations and economic slowdowns. In this situation, the DP must carefully consider whether breaking up the Finance Ministry truly aligns with the nation’s policy priorities. Rather than rushing, it should engage in thorough discussions and present a reasonable, well-considered alternative.

Translated from the JoongAng Ilbo using generative AI and edited by Korea JoongAng Daily staff.