S. Korean government comes up with set of fiscal rules to ensure fiscal soundness
- 4 years ago
국가채무 60%•재정수지 -3% 이내…재정준칙 2025년 도입
The South Korean government is seeking to pass new rules that would prevent massive deficit spending in the future once the COVID-19 pandemic is over.
Eum Ji-young explains.
The rules proposed by the Moon Jae-in administration aim to keep rising government debt in check and ensure the country's fiscal soundness.
Introducing the plan in a briefing on Monday, Finance Minister Hong Nam-ki said that South Korea has recently had no choice but to spend more to overcome the economic crisis caused by COVID-19.
Not only is the country's economic growth slowing down, he said, it faces more public spending in the future as its population rapidly ages.
"The government has devised a fiscal rule suitable for South Korea by setting standards for the national debt and the deficit in a way commonly used in countries around the world."
Under the plan, either government debt should stay under 60 percent of GDP
or the deficit should not exceed three percent of GDP.
If either factor exceeds its threshold, then the government will make adjustments so that the other meets the target.
But in times of recession or economic crisis, the fiscal rules are to be temporarily waived or eased.
Because the government is still dealing with the COVID-19 pandemic, the fiscal rules will be implemented from 2025 if approved by the National Assembly.
Minister Hong said South Korea's general government debt-to-GDP ratio currently stands at around 40 percent, which is relatively good compared to the average of the OECD member countries... of 108-point-9 percent.
But because South Korea's ratio is expected to rise to about 59 percent by 2024, the government also plans to raise the minimum amount of surplus tax revenues that have to go to debt service... from the current 30 percent to 50 percent.
Eum Ji-young Arirang News.
The South Korean government is seeking to pass new rules that would prevent massive deficit spending in the future once the COVID-19 pandemic is over.
Eum Ji-young explains.
The rules proposed by the Moon Jae-in administration aim to keep rising government debt in check and ensure the country's fiscal soundness.
Introducing the plan in a briefing on Monday, Finance Minister Hong Nam-ki said that South Korea has recently had no choice but to spend more to overcome the economic crisis caused by COVID-19.
Not only is the country's economic growth slowing down, he said, it faces more public spending in the future as its population rapidly ages.
"The government has devised a fiscal rule suitable for South Korea by setting standards for the national debt and the deficit in a way commonly used in countries around the world."
Under the plan, either government debt should stay under 60 percent of GDP
or the deficit should not exceed three percent of GDP.
If either factor exceeds its threshold, then the government will make adjustments so that the other meets the target.
But in times of recession or economic crisis, the fiscal rules are to be temporarily waived or eased.
Because the government is still dealing with the COVID-19 pandemic, the fiscal rules will be implemented from 2025 if approved by the National Assembly.
Minister Hong said South Korea's general government debt-to-GDP ratio currently stands at around 40 percent, which is relatively good compared to the average of the OECD member countries... of 108-point-9 percent.
But because South Korea's ratio is expected to rise to about 59 percent by 2024, the government also plans to raise the minimum amount of surplus tax revenues that have to go to debt service... from the current 30 percent to 50 percent.
Eum Ji-young Arirang News.