The South Korean government will rationalize fiscal spending to minimize losses as much as possible as it grips for worsening economic and tax income prospects, while planning a supersized budget for next year to fend off recessionary risks, according to a senior finance ministry official.

“We plan to conduct a comprehensive examinations on spending plans in all government offices as external uncertainties and internal demographic risks can worsen fiscal income structure,” Koo Yun-cheol, second vice minister of economy and finance in charge of managing government budget, told an inter-departmental meeting on Thursday.

Koo said the finance ministry will carry out an all-out inspection of the public projects and reform spending structure next year.

Hong Nam-ki, finance minister who doubles as deputy prime minister, told the National Assembly on the same day that the government is mulling over 510 trillion won ($421 billion) in 2020 budget in view of economic conditions and stimuli needs. This would be an 8.6 percent increase from 2019 record-high spending, which was raised 9.5 percent from the previous year.

The jump in spending plans has put Korea’s fiscal integrity at risk as tax revenue has been declining due to reduced corporate and household income. The government collected tax revenue of 156.2 trillion won in the first half of this year, off 1 trillion won from the same period last year. Prospects for tax income for the second half are even murkier, given double-digit contraction in exports.

Education spending could be the first to be axed. Budgeting in education rose over 20 percent over the last five years even as school-age heads shrank over 10 percent in line with falling birthrates over the same period.

The government will also give an extra look into projects managed under special accounts and funds as well as research and development.

Government budget under funds and the special accounts this year reached 496.6 trillion won, making up a whopping 41 percent of the total public spending, but related spending has been under constant challenges for unbalanced distribution of the budget. There are individual 67 funds for managing public funds such as national pension and employment insurance, and 19 special accounts, which include those for improving farming and fishing communities.

State’s review on R&D projects for fiscal supports is also expected to be fixed to evaluate projects better on their achievements.

By Lee Yu-sup and Cho Jeehyun

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