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The Korea Herald
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THE INVESTOR
March 30, 2024

Economy

W11.2tr supplementary budget plan unveiled

  • PUBLISHED :June 05, 2017 - 18:13
  • UPDATED :June 05, 2017 - 18:13
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[THE INVESTOR] The Finance Ministry on June 5 unveiled an 11.2 trillion won (US$10 billion) supplementary budget plan designed to create more jobs and bolster the livelihoods of low-income people.

The budget proposal, which came less than a month after President Moon Jae-in took office, was approved at a Cabinet meeting later in the day. It is set to be submitted to the National Assembly on June 7 for approval.

The extra budget marks the first follow-up to Moon’s campaign pledge to push for income-led growth by creating a massive number of jobs mainly in the public sector and expanding welfare benefits.

Of the proposed budget, 4.2 trillion won will be spent on creating 110,000 jobs within this year -- 71,000 in the public sector and 39,000 in the private sector.

The budget plan has set aside 1.2 trillion won and 2.3 trillion won to improve working conditions and stabilize the livelihoods of low-income families, respectively. The remaining 3.5 trillion won will be given to provincial governments.

Moon said last week that, if necessary, he would give a parliamentary speech to gain backing from opposition lawmakers for the proposed budget.

The liberal ruling Democratic Party of Korea is working to arrange for the presidential speech to be made next week and pass the extra budget bill during the ongoing parliamentary session that ends on June 30.

But Moon and the ruling party face an uphill battle as the three opposition parties, which combined hold a majority in the 299-member parliament, remain negative to the supplementary budget plan.

Opposition lawmakers say spending on increasing public-sector jobs does not fall into any legal category for permitting an extra budget.

The current law stipulates specific cases in which a supplementary budget can be drawn up -- including war, natural disaster, economic recession and other serious changes in external and internal conditions surrounding the economy.

Data released by the Bank of Korea last week showed the country’s economy grew at a faster-than-expected pace in the first quarter of this year from three months earlier on the back of increased exports, construction and facility investments.

Korea’s gross domestic product expanded 1.1 percent in the January-March period from the previous quarter, up from an earlier estimate of a 0.9 percent expansion in late April.

Outgoing Finance Minister Yoo Il-ho has been in an awkward position to work on the extra budget plan until his successor takes office, in a departure from his previous negative view of additional fiscal spending.

In a bid to strengthen their case for the planned budget, Moon and his aides have widened its purposes to include measures to support low-income people as well as job creation programs.

But economists raise questions about the relevance and effects of the budget proposal.

Yun Hee-suk, a professor at the Korea Development Institute’s School of Public Policy and Development, noted even if there was the need to hire more state employees, the cost should be reflected in the annual regular budget as their salaries would begin being paid from next year.

The Employment and Labor Ministry and other government agencies had difficulties working out programs to be funded by the planned extra budget, which should be used up by the end of the year.

“Ineffective job programs need to be sifted out through the process of parliamentary deliberation,” said Cho Dong-geun, a professor of economics at Myongji University.

The country’s unemployment problem has barely improved despite an increase in the job-related fiscal expenditure from 11 trillion won in 2013 to 17.1 trillion won this year. The jobless rate rose from 3.1 percent to 4.2 percent over the cited period, with the figure for young people reaching 11.2 percent in April.

The planned supplementary budget would do little to improve the unemployment problem fundamentally if it was spent mostly on funding public work programs designed to help low-income people and offering subsidies for employment at small and medium-sized firms.

Economists note Moon’s proposal to resolve the jobless problem mainly by creating more public-sector jobs would be unsustainable, imposing hefty fiscal burdens in the long run.

It is estimated to cost 15 trillion won to make payments for 12,000 government employees to be hired additionally within this year for about three decades until they reach retirement age.

More important than drawing up a supplementary budget is accelerating deregulation and structural reforms to make the labor market less rigid and boost the service sector and new growth engines, economists say.

Yoon said the country should no longer take it for granted to draw up a supplementary budget as a means of showing political will in disregard of principles of fiscal management.

Under the government led by Moon’s conservative predecessor Park Geun-hye, extra budgets were drawn up in 2013, 2015 and 2016 to bolster the sluggish economy, cope with an epidemic disease and cushion the impact from the British vote to leave the European Union.

When in opposition, Moon’s party opposed them as unfit for fiscal disciplines.

By Kim Kyung-ho/The Korea Herald (khkim@heraldcorp.com)

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