April 19, 2024

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Second Vice Finance Minister Choi Sang-dae speaks during a press conference on the budget guidline for next year at the government complex in Sejong, Tuesday. (Yonhap)

South Korea will continue to tighten its belt by reducing more than 10 percent of its discretionary expenditure while planning to funnel the budget into boosting national security and creating jobs for young people.

Next year's budget plan is expected to remain at around 670 trillion won ($515.9 billion), up about 4.8 percent from this year's 638.7 trillion won, which was proposed as a mid- to long-term plan by the government. The budget will be earmarked for enhancing economic vitality, such as expanding exports, protecting the vulnerable, and reforming labor, education and pension systems.

“Next year, while maintaining a sound fiscal stance, the government will properly perform essential national functions such as national defense and rule of law, enhance future growth foundations and job creation capabilities, and make sufficient fiscal expenditures to strengthen welfare for the vulnerable people,” President Yoon Suk Yeol said during a Cabinet meeting on Tuesday.

The budget guideline, approved during the meeting, was the first official budget drafting guideline established by the Yoon government, which contains the basics of fiscal management, investment focus and fiscal innovation direction for the next year.

As concerns grow over rising national debt and tax revenue, improving fiscal health has become one of the government's top agendas.

“Unjust financial leakage, such as subsidies given to organizations whose accounting and fund execution are unclear, cash distribution and subsidies for which the use is unclear, must be thoroughly prevented and the welfare delivery system must be streamlined,” Yoon said.

Over 10 percent of discretionary expenditure, which accounts for about half of the total budget, will be reduced. Spending on state-run programs that have been showing poor performance or donations and investments that have been routinely carried out without tangible results will be subjected to the budget cut.

The 2024 budget will provide bold support in four areas: enhancing private economic vitality; protecting the socially underprivileged and the vulnerable; innovating the economic constitution and structure; and strengthening the basic functions of the state.

“The 2024 budget will invest boldly, focusing on welfare for the weak, creating high-quality jobs for young people, and strengthening defense, security, judicial and administrative services that protect public safety and property,” said Second Vice Finance Minister Choi Sang-dae during a press conference at the government complex in Sejong.

To enhance economic vitality centered on the private sector, ministries will funnel the budget toward initiating an export drive, nurturing startup firms and securing 12 national strategic technologies which include semiconductor and display, secondary cells, leading-edge mobility and next-generation nuclear energy.

In the defense sector, the government has decided to spend its budget on advanced weapons systems such as asymmetric power response and the establishment of a homegrown three-axis system against North Korea's nuclear and missile threats. It will also continue to raise salaries for conscripted soldiers and improve their living conditions.

For public safety, investigative vehicles and detection equipment will be expanded to prevent and respond to drug crimes. It also plans to strengthen its ability to respond to house renting fraud, voice phishing, stalking and digital sex crimes.

The government will establish a mechanism to respond to and preemptively prepare for new and complex disasters, strengthen food and drug management and invest more into maintenance of areas vulnerable to traffic accidents.

In order to "create high-quality jobs for young people," the government will support small and medium-sized companies’ exports through trade finance and developing new export items such as in the area of nuclear power plants and defense.

For the protection of the socially disadvantaged and vulnerable groups, the Finance Ministry said it will spend on expanding welfare services tailored to the vulnerable while reducing cash handouts.

It will seek to cover welfare blind spots, such as isolated young people cut off from society, and strengthen the guarantee of welfare systems, such as the basic living security system.

The government plans to support the implementation of three major structural reforms, including those in the labor, education and pension systems, in terms of finances and to find solutions for boosting the ultralow birth rate throughout the marriage, pregnancy, childbirth and child care cycle.

Parental benefits will be raised from 700,000 won to 1 million won per month next year, and support for national scholarships and student loans will be expanded.

Based on the budget requests received from each ministry by the end of May, the government will consult related ministries, local governments and the public on the budget proposal from June to August, before submitting it to the National Assembly by Sept. 2.

By Park Han-na (hnpark@heraldcorp.com)