■ Alluding to National Bond Issuance
Limitations in Tax Reform and Private Funding
“There’s much to be done, but no money to spend,” he states
The Policy Planning Committee also estimates “210 trillion won needed”
Emphasizes “adjustment of wasteful budget expenditures”
President Lee Jae-myung’s statement on the 13th during the ‘State Finance Saving Conference’ that “If you can borrow a small amount to plant seeds and then harvest a large amount in the fall, shouldn’t you obviously borrow to plant the seeds?” is interpreted as a tacit expression of willingness to issue national bonds. This perspective arises from the recognition that expanding tax revenues through tax reform or adjusting expenditure structures alone will not suffice to raise the 210 trillion won needed over the next five years to fulfill campaign promises.
During the State Finance Saving Conference held at the Yongsan presidential office in Seoul, President Lee remarked, “There are those who argue that we must live within our means if we try to borrow seeds from the next-door,” he noted. “If we are told to live solely within our existing means without borrowing, then we cannot farm,” he elaborated. He continued, expressing frustration over “having much to do in governance but lacking funds to spend, and while plenty of fields are ready, the thought of leaving them barren due to a lack of seeds is indeed disheartening.”
Political circles interpret this as signaling that the President sees no choice but to increase ‘national debt’ through bond issuance. The National Policy Planning Committee, presenting the government’s blueprint at a public report meeting that afternoon, estimates that a total of 210 trillion won will be needed over the next five years for national tasks and campaign pledges. Even excluding the 33 trillion won increase in subsidy grants, 177 trillion won in fiscal expenditure is unavoidable. It is largely seen as difficult to cover this financial need solely through tax revenue expansion or adjustments to wasteful expenditures.
Initially, the National Policy Planning Committee had envisioned raising 94 trillion won through tax reform and an additional 116 trillion won by adjusting expenditures and utilizing funds and private resources to amass the 210 trillion won ‘arsenal’. However, if the scope for revenue expansion shrinks due to ongoing discussions on maintaining the standard for major shareholders liable for capital gains tax, bond issuance becomes inevitable. The National Assembly had included a plan for issuing 21.1 trillion won in national bonds in the second supplementary budget bill, passed last month. Consequently, national debt, including local government liabilities, is projected to surpass 1,300 trillion won by year’s end, pushing the national debt-to-GDP ratio to 49.1%.
In the conference, President Lee reiterated that wasteful budget expenditures must be minimized. He stressed the need to “adjust budget expenditures in inefficient areas to secure available resources” and emphasized the importance of evaluating existing budget issues and considering measures to save for achieving the government’s goals of “genuine growth” and “restoring livelihoods.”
Previously, during a cabinet meeting on the 15th of last month, President Lee also highlighted the necessity to revise inefficient ‘traditional and wasteful budget’ items.