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Concerns have been raised that the fiscal rules that the government has decided to publish later this month are already “blind.” This reflects the passport view that the introduction of fiscal rules does not correspond to the active fiscal stance of the current government. The government also emphasized flexibility over principles. There are exceptions to the economic slowdown and disaster situations. It is pointed out that this flexible method cannot save the system’s purpose of controlling the rate of debt.
Hong Nam-ki, Deputy Prime Minister for the Economy and Minister for Strategy and Finance, responds to questions from lawmakers at the general meeting of the Planning and Finance Committee held at the National Assembly in Yeouido, Seoul on the 21st. News 1
Hong Nam-ki, “Announcement of Financial Rules in September”
Hong Nam-ki, Deputy Prime Minister of the Economy and Minister of Strategy and Finance, told the Planning and Finance Committee of the National Assembly on the 21st: “We will announce the fiscal rules in September.” Vice Premier Hong explained: “I was going to present it at the end of August, but the review was delayed because I investigated all the rule systems abroad,” he explained, “the final stage of review.”
The announcement period is from the 28th to the 29th of this month. The fiscal rule is a system that regulates the deficit of the fiscal balance and the total amount of the national debt within a certain level. It is a device to curb the accelerated growth of debt. The government estimates that the ratio of the national debt to the gross domestic product (GDP) will be 43.9% and the ratio of the deficit of the managed fiscal balance will be 6.1% this year, with four additional budgets (additional budget ) organized this year. All of these are the highest figures in history.
Exceptions in case of disaster or economic recession
The government is considering ways to prevent the national debt ratio or managed fiscal deficit from exceeding a certain number based on the year-on-year increase. The introduction of the “PAY-GO” principle is also promoted. Like the welfare system, it is a system that must prepare a plan to secure financial resources by introducing mandatory expenses that are difficult to reduce in the future.
The explosion of the national debt. Graphic = Reporter Kim Kyung-jin [email protected]
There are also exceptions. In the case of an infectious disease such as a new coronavirus infection (Corona 19), a disaster, or an economic recession, it is an expression to specify that there is no need to comply with financial rules. Vice Premier Hong Nam-gi announced next year’s budget earlier this month, saying: “We will create fiscal rules by strengthening flexibility, such as allowing exceptions to situations where finance must play a role due to extreme crises like this crisis. of Corona 19 “. Vice Premier Hong also explained in an online conference at the Democratic Party’s ‘Parliamentary Assembly Members Workshop 2020’: “In case of economic slowdown, we will ease the cap (national debt index, etc.) and waive it in case of crisis “.
There were even voices from the ruling party that the enactment of the fiscal rules should be withdrawn. Park Hong-geun, a member of the Democratic Party, told a subcommittee meeting of the Special Committee on Budget and Liquidation of the National Assembly in July: “To overcome the economic crisis, an expanding fiscal direction is needed. The creation of fiscal rules. at this point it could cause unnecessary social controversy. ”
Forecast of public debt over GDP in 2060. Reporter Park Kyung-min
“If you put broad exceptions, they will only declare you fiscal rules”
There is concern that even if the party and government establish a fiscal rule, it will be ignored when the comprehensive exception rules are discussed. Ahn Chang-nam, professor of economic and fiscal affairs at Gangnam University, said: “If we do not provide a separate selection process for exceptions to the fiscal rules, the fiscal rules will only be declared at the declaration level.” Shin Se-don, emeritus professor of economics at Sookmyung Women’s University, emphasized: “The law is established so that the average rate of growth of the budget cannot be exceeded in the last three years, and to allow for exceptions, requirements like ‘passing more than two-thirds of the enrollment of legislators,’ which are at the amendment level. ” did.
The government’s fiscal rules are expected to be controversial in the National Assembly. This is because opposition parties insist on fiscal rules that are much stricter than the government and ruling parties. The opposition party has already initiated four related bills. It includes contents such as the maintenance of a deficit in the national debt ratio of 45% of GDP and a managed fiscal balance of less than 2% of GDP. Earlier, in 2016, the government submitted a bill to the National Assembly that contained fiscal rules to manage the national debt ratio at 45% or less of GDP and the managed fiscal deficit at less than 3% of GDP. However, the bill was automatically abolished because it could not cross the threshold of the National Assembly.
Reporter Sejong = Ha Namhyun [email protected]
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