2024 Fiscal Year National Settlement Reviewed and Approved by Cabinet Meeting
– Managed fiscal balance deficit at 104.8 trillion KRW due to 30 trillion tax revenue shortfall
– National debt at 1,175.2 trillion KRW… 46.1% of GDP
– Only 200 billion KRW available for supplementary budget of 10 trillion KRW
Due to a ‘tax revenue shortfall’ for two consecutive years, the government has failed to adhere to its fiscal rules for three years in a row. This poor performance contrasts starkly with the Yoon Suk-yeol administration’s emphasis on sound fiscal policy. Although the ratio of national debt to GDP decreased by 0.8 percentage points, national debt reached 1,175 trillion KRW.
On the 8th, the Ministry of Economy and Finance outlined these findings in the ‘2024 Fiscal Year National Settlement Report,’ which was reviewed and approved by the Cabinet. The national settlement report finalizes the past year’s revenue, expenditure, and national debt. It will be submitted to the National Assembly at the end of May after undergoing an examination by the Board of Audit and Inspection.
The managed fiscal balance, which reflects the actual state of national finances, was a deficit of 104.8 trillion KRW last year. This balance is a primary indicator excluding four major social security funds like the national pension from the consolidated fiscal balance. The deficit increased by 17.8 trillion KRW compared to the previous year’s settlement (87 trillion KRW deficit) and exceeded last year’s budget forecast by 13.2 trillion KRW.
Park Bong-yong, Director General of Fiscal Management at the Ministry, explained, “Although revenue decreased last year, expenditures on essential public services were maintained.” In fact, a failure to accurately predict tax revenue led to 30.8 trillion KRW less collected than initially budgeted.
Yoon Suk-yeol Administration’s Emphasis on Sound Finance Reduced to ‘Empty Slogan’
The Yoon administration has failed to adhere to its self-imposed fiscal rules for three consecutive years. Despite criticizing the Moon administration’s expansionary fiscal policy and expressing a commitment to legislating fiscal rules for sound finance, the Yoon administration did not meet these targets. The fiscal rule aims to limit the managed fiscal deficit to within 3% of GDP annually. However, the actual rates were 5.0% in the first year of government in 2022, 3.6% in 2023, and 4.1% last year.
Hwang Hee-jung, Director of Fiscal Soundness at the Ministry, stated, “The legalization of fiscal rules is an ongoing goal for ensuring the sustainability of public finances, and the government plans to continue working towards this.”
Last year’s national debt stood at 1,175.2 trillion KRW, 46.1% of GDP. Although national debt increased by 48.5 trillion KRW compared to the previous year’s settlement, it decreased by 0.8 percentage points relative to GDP. Compared to last year’s budget, it decreased by 20.5 trillion KRW due to reduced issuance of foreign exchange stabilization bonds and national housing bonds by 19.2 trillion KRW and 4.6 trillion KRW, respectively. The issuance of foreign stabilization bonds was delayed due to legal amendments at the end of last year, and mandatory purchases of housing bonds decreased as real estate transactions declined.
The government is pushing for a ‘necessary supplementary budget’ totaling 10 trillion KRW, but securing the funds is expected to be challenging. The carryover surplus, which refers to the remaining amount after subtracting total spending from total revenue within the fiscal year, is 2 trillion KRW. Excluding special accounts (1.6 trillion KRW), only 400 billion KRW is left in the general account. However, after accounting for debt repayment, only about 200 billion KRW is available for supplementary budget use. Park stated, “We will consider using surplus funds from the Bank of Korea and other sources to finalize the supplementary budget.”