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Namki Hong “Financial rules are not lax … Already beyond the baseline”
Reporter Kim Deok-jun [email protected]
Check-in: 2020-10-06 17:58:54Revision: 2020-10-06 17:58:54Posted: 2020-10-06 17:59:11
Vice Prime Minister Hong Nam-ki and the Minister of Strategy and Finance are speaking at a briefing on how to introduce Korean fiscal rules that was held at the Sejong Government Complex on the 5th. It provides the basis
Vice Premier Hong Nam-ki and the Minister of Strategy and Finance said: “The integrated fiscal balance is -4.4% this year compared to the gross domestic product (GDP), which already exceeded -3%, the Basis of the fiscal rule The consolidated fiscal balance includes Korean government accounting and public funds, and the consolidated fiscal balance is in the red at 75 trillion won as of July this year.
On the 6th, Vice Premier Hong held an unscheduled briefing at the Sejong Government Complex. It seems that the voices of criticism came out about the fiscal rules announced on the 5th.
It decided to manage the national debt index within 60% of gross domestic product (GDP) and the integrated fiscal balance within -3% of GDP. “There is a point where it is too flexible, but look at the meaning of the fiscal rule formula.” did.
He said: “The public debt ratio is 43.9% this year from the fourth supplementary standard, but it has increased to 58.6% in 2024, and the consolidated fiscal balance is already -4.4% this year, exceeding -3% (the base line of the fiscal rule) “. It is a structure that is close to 60%, so it never comes loose. “
Vice Premier Hong said: “Public debt and fiscal balance are too tight in terms of Y and too lax in terms of OR, so we use the formula to multiply the two.” “This rule that combines efforts to gradually reduce the fiscal balance deficit is the most desirable. Do it,” he explained.
The government designed that even if one indicator exceeds the standard, it can be satisfied if another indicator falls below the standard. Consequently, the formula for the fiscal rule is that the multiplication of the national debt ratio divided by 60% and the consolidated fiscal balance divided by -3% must be 1.0 or less.
Vice Premier Hong explained that the financial situation cannot be easily recovered in the next few years due to the aftermath of Corona 19. He said: “It is not easy to recover the deficit unless there is a special tax increase in the situation where we issued more than 100 trillion won in deficit government bonds after going through four additional governments this year. “
Regarding the fiscal rules being set to be implemented in 2025, he said, “The actual application of the rules is from fiscal year 2025, but we cannot stop respecting these rules in 2022-2023. This means that the line Base cannot be met in 2025 unless the rule rate is administered in advance.
Reporter Kim Deok-jun [email protected]
