‘Sustainable finances’: A sobering phrase for Korea’s next administration

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‘Sustainable finances’: A sobering phrase for Korea’s next administration

Published: 27 May. 2025, 00:02

Audio report: written by reporters, read by AI

Suh Kyoung-ho

The author is an editorial writer at the JoongAng Ilbo.

By all accounts, President Kim Dae-jung’s first televised conversation with the public in early 1998 captured a moment of national anxiety. “When I received the keys to the treasury and opened it, there wasn’t even a single 1,000 won bill — only mountains of IOUs,” he said. While the sense of shock Kim described may have been unique, frustration over the state of national finances during transitions of power is nothing new in Korea.

Even when conservative administrations handed the baton to one another — such as during the Lee Myung-bak and Park Geun-hye years — the new leadership expressed dissatisfaction with what they inherited. The Lee administration, to its credit, navigated the global financial crisis with relative success, earning praise for a “textbook recovery.” However, it did so by deploying a large-scale fiscal stimulus, resulting in a 90 trillion won ($65.7 billion) increase in national debt between 2008 and 2010. This forced a reconsideration of fiscal balance. In his Liberation Day address in 2011, Lee pledged to return to a balanced budget by 2013. Accordingly, the 2012 and 2013 budgets were drafted under strict austerity guidelines.

Lee Jae-myung, presidential candidate of the Democratic Party, and SK Group Chairman Chey Tae-won, who also heads the Korea Chamber of Commerce and Industry, attend a meeting with leaders of Korea’s five major business organizations at the chamber’s headquarters in Jung District, Seoul, on May 8. [NEWS1]

At the time, I was covering the Ministry of Strategy and Finance and wrote a column titled “Leave Some Scorched Rice.” The message was simple: the government was scraping the bottom of the fiscal barrel. Leftover budget items, surplus funds and even unused reserves were all exhausted. I likened it to scraping the crust of rice from the bottom of a pot. That crust, I argued, was a meal for tomorrow — a basic courtesy to the incoming administration that had grown increasingly rare.

The Park Geun-hye administration, launched in 2013, struggled with major revenue shortfalls in its first two years. While Lee’s administration bore some responsibility, due to an 82 trillion won tax cut that weakened the revenue base, the overestimated tax projections in Lee’s final budget for 2013 also played a role. The focus on balanced budgets left little room for aggressive countercyclical spending. Park’s team inherited a “leaky” budget and scrambled to increase revenue. One attempt involved reducing income deductions, prompting criticism for “plucking the goose too harshly.” Even the presidential chief economic adviser faced backlash.

In April 2022, just before Yoon Suk Yeol took office, presidential transition committee chair Ahn Cheol-soo criticized the outgoing Moon Jae-in administration, saying, “The economy is a mess, and the country is buried in debt.” He was referring to the 407 trillion won rise in national debt under Moon’s five-year term. The presidential office under Moon fired back, saying the judgment was unfair and warned it could backfire. In hindsight, it did. Fiscal conditions have since deteriorated further. As of last year, national debt stood at a record 1,175 trillion won — up more than 100 trillion won since the start of the Yoon administration. The government’s consolidated fiscal deficit reached 105 trillion won.

In the current presidential race, policy pledges — especially those related to fiscal spending — are drawing less attention than expected. This may be due to the dominant narrative surrounding the Yoon administration’s handling of martial law and growing voter dissatisfaction. Lee Jae-myung, the Democratic Party’s candidate and current front-runner, has taken a cautious approach. Pledges that could invite accusations of populism are labeled as “phased.” His proposals to expand child allowances and introduce new high-speed commuter rail lines (GTX lines D, E and F) are offered with restraint.

Kim Moon-soo, the People Power Party candidate, appears more eager to close the gap. Yet, even his proposal to raise the basic pension is targeted — limited to vulnerable groups in the bottom 50 percent income bracket. Despite the presence of some overly ambitious pledges, it is somewhat reassuring that experts within each camp seem to be exercising restraint.

Whoever wins the presidency will inherit a gaping fiscal hole. The Korea Development Institute recently lowered its 2024 growth projection to 0.8 percent and warned against further government spending. Concerns about national debt, far from being “ignorant talk,” as Lee once implied, are in fact grounded in pressing economic realities.

People Power Party (PPP) presidential candidate Kim Moon-soo announces his pledges at PPP headquarters in western Seoul on May 18. [YONHAP]

These days, the phrase “sustainable finances” is replacing “fiscal soundness” in the public discourse. In a recent essay in a financial journal, a scholar noted with irony that the goal of fiscal policy is no longer growth or national welfare, but simply survival. It is a sobering comparison. If the purpose of life is reduced to mere existence, rather than happiness or self-fulfillment, what does that say about the state we are in?

After all, vital signs are most critical when a patient is in danger. That “sustainability” has become the operative word for Korean fiscal management and says much about how precarious the situation has become.

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