Introducing a pre-budget system for the 700 trillion gained period

Shin Hae-ryong
 
The creator is a professor at Chung-Ang College Graduate College of Public Administration and former chief of the Nationwide Meeting Price range Workplace.
 
 
 
Following a revision of the Authorities Group Act, the Ministry of Economic system and Finance might be break up in 2026 into the Ministry of Finance and Economic system and the Workplace of Planning and Price range. Beneath President Kim Younger-sam, the 2 ministries have been merged right into a single company. President Kim Dae-jung then separated them once more. They have been reunited throughout the Lee Myung-bak administration and remained built-in for 18 years, till President Lee Jae Myung determined to separate them as soon as extra. This continuous institutional shifting displays a protracted debate over how the nation ought to handle income and expenditure.
 

President Lee Jae Myung, backside, delivers his finances speech on the Nationwide Meeting in Seoul on Nov. 4, as speaker Woo Received-shik sits above him. [YONHAP]

 
Integration and separation every convey advantages and dangers. When a single ministry handles each income and spending, it will possibly coordinate tax and expenditure coverage extra successfully whereas sustaining fiscal self-discipline. However concentrated management over each taxation and budgeting dangers creating an outsized paperwork. Then again, separation allows checks and balances by dividing tax and finances authority, however it will possibly sluggish responses to financial shifts and result in bigger fiscal deficits if political bargaining prevails.
 
On Nov. 4, President Lee delivered his first parliamentary tackle on the nationwide finances since taking workplace. The federal government’s 2026 spending proposal reached 728 trillion gained, surpassing the 700 trillion gained mark for the primary time in Korea’s historical past. The dimensions and complexity of public finance will proceed to develop. Inhabitants growing old and low birthrates are driving a fast improve in welfare spending, whereas addressing local weather change and securing synthetic intelligence sovereignty would require large investments. But the fiscal base stays weak, and authorities debt is rising sharply.
 
Peter Drucker warned that the best hazard in instances of turbulence is performing with the logic of the previous. Can Korea’s present fiscal construction stay sustainable? If not, what reforms are wanted to keep up nationwide prosperity?
 
 
A viable resolution is the introduction of a “Pre-Price range” system.
 
Adopted by main OECD international locations within the mid-Nineties, the system requires governments to submit fiscal pointers — reminiscent of expenditure ceilings and financial stability targets — to parliament earlier than the complete finances is drafted. It thus separates debate over general fiscal course from negotiations over particular person tasks.
 
Korea nominally operates a medium-term fiscal planning framework by the Nationwide Fiscal Administration Plan. However as a result of it’s submitted to the Nationwide Meeting in early September, alongside the primary finances invoice, lawmakers have little time to assessment fiscal coverage from a long-term perspective.
 
A small procedural change might make a big distinction. If the fiscal administration plan have been submitted to parliament 5 months earlier, in April, and if finances pointers included whole fiscal limits and spending caps by ministry, it could lay the groundwork for a pre-budget course of. Parliament might then conduct open debates on income, expenditures and financial stability earlier than deliberating the complete finances. This may improve each fiscal transparency in addition to the democratic legitimacy of finances choices. It could additionally present political backing for troublesome choices taken by the federal government throughout finances formation.
 

The headquarters constructing of the Ministry of Economic system and Finance in Sejong [MINISTRY OF ECONOMY AND FINANCE]

 
To make this work, the Nationwide Meeting’s finances assessment system should even be reformed. At present, the method follows a two-step strategy: preliminary assessment by standing committees adopted by a complete assessment by the Particular Committee on Price range and Accounts. A pre-budget course of would require a three-step, top-down construction: first, a complete expenditure assessment by the finances committee, adopted by autonomous allocation inside every standing committee underneath these limits after which a ultimate complete assessment.
 
In the long run, lawmakers might think about enacting a Nationwide Meeting Price range Act to institutionalize such adjustments.
 
Splitting the finance ministry and finances workplace isn’t a brand new street, however moderately a return to an earlier strategy. Exactly as a result of this path has been taken earlier than, the federal government ought to fastidiously assessment previous practices and use that have to craft a street map for pre-budget reform. Making certain fiscal soundness, effectiveness and predictability have to be on the heart of public finance on this period of 700 trillion gained budgets.