The government is acknowledging the reality that it has become difficult to achieve the previously set fiscal rules target due to the deterioration of the fiscal balance resulting from increased expenditure in the formation of the supplementary budget. It will pursue the establishment of a new fiscal rules model. First, it plans to hold a public hearing in collaboration with the National Assembly Secretariat to conduct social discussions on the fiscal rules and to establish a fiscal rules model that reflects experts' opinions, according to the Ministry of Economy and Finance.
According to the Ministry of Economy and Finance and others on the 29th, the government is preparing to hold a public hearing on the introduction of fiscal rules in conjunction with the National Assembly. Fiscal rules refer to norms established by law to manage fiscal balance or national debt levels to ensure the sustainability of public finances.
At a recent briefing on the supplementary budget announcement, Vice Minister of Economy and Finance Lee Gi-geun responded to a question regarding the ongoing pursuit of fiscal rules by saying, "It is necessary to reevaluate the feasibility and acceptability of the fiscal rules," leading some to speculate that the Ministry of Economy and Finance may have effectively withdrawn from the legislation of fiscal rules. The absence of the expression, "We will continue to pursue the legislation of fiscal rules, which is the basic principle of fiscal management to ensure the sustainability of public finances," in the supplementary budget report submitted to the National Assembly has also fueled such speculation.
In response, a Ministry of Economy and Finance official emphasized, "We have not withdrawn the decision to introduce fiscal rules itself." This official explained that creating a realistic fiscal rules model in the current situation, where it has become difficult to comply with the fiscal rules that were intended to be legislated during the previous administration, is a priority task.
The core of the fiscal rules set by the previous government is to manage the deficit ratio of the consolidated fiscal balance without social security fund to within 3% of gross domestic product (GDP). However, due to the second supplementary budget, the deficit-to-GDP ratio has expanded to 4.2%, exceeding the upper limit of "3%" established by the fiscal rules.
In this regard, Vice Minister Lee said, "Under the current conditions, it is not easy to adhere to the '3% deficit ratio' prescribed by fiscal rules," and added, "Rigid compliance with this could rather lead to adverse effects on the economy and fiscal management." This implies that the fiscal rules set by the previous government lack practicality.
For the government, creating a realistic fiscal rules framework that takes into account the economic conditions and fiscal situation has become a task. A Ministry of Economy and Finance official stated, "If the rules are set as goals so difficult that the government cannot achieve them, the feasibility diminishes, and if the goals are too easily attainable, it negates the meaning of the rules," and added, "There is no change in the government's policy to establish a fiscal rules model that considers these various factors and to pursue legislation."
Within the Ministry of Economy and Finance, there are voices suggesting that a minister's appointment to exhibit leadership is a prerequisite for this work to proceed smoothly. Another official from the Ministry of Economy and Finance remarked, "Legislating fiscal rules must be accompanied by public outreach and efforts to persuade the National Assembly," adding that, "It is a difficult task to pursue without leadership to set specific goals and direct the tasks." The schedule for the National Assembly's public hearing and related issues will also be discussed concretely after the minister's appointment, along with the composition of the Strategy and Finance Committee in the second half of the 22nd National Assembly, according to the Ministry of Economy and Finance official.