The National Assembly's Budget Policy Office pointed out that the government's supplementary budget plan of 12 trillion won raises issues by relying on easy 'Government Bonds' issuance instead of making 'expenditure' structural adjustments. Expenditure restructuring means reallocating funds from projects whose execution likelihood has decreased compared to initial expectations. In the previous 2022 supplementary budget, the Ministry of Economy and Finance secured 7 trillion won solely through expenditure restructuring.
As this supplementary budget depends on Government Bonds, the issuance of government bonds this year is expected to exceed 200 trillion won. This level surpasses that of the period when supplementary budgets were formulated to respond to COVID-19.
In its recently published analysis of the '2025 First Supplementary Budget,' the National Assembly's Budget Policy Office criticized that 'the review of the possibility of securing funds through expenditure restructuring should have been proactively conducted, but this time it was excluded (not considered).'
On the 18th, the Ministry of Economy and Finance stated that a supplementary budget of 12.2 trillion won is needed to address the massive forest fires in the Yeongnam region and the tariff war that originated from the U.S. The funds will be sourced from Government Bonds issuance (8.1 trillion won) and surplus funds from collected taxes (4.1 trillion won), such as global surplus funds. In the most recent supplementary budget in May 2022, the Ministry of Economy and Finance raised 59 trillion won through an unprecedented supplementary budget by securing 7 trillion won through expenditure restructuring.
Considering that only a quarter has passed, it is unfortunate that there are difficulties in accurately assessing the progress of projects concerning expenditure restructuring. This is based on the experience from the 7.6 trillion won supplementary budget in April 2020, where 6.4 trillion won was secured through expenditure restructuring in response to COVID-19.
The National Assembly's Budget Policy Office noted, 'As the necessity of compiling supplementary budgets has been raised multiple times, the government could have proactively examined projects suitable for expenditure restructuring.' They added, 'Based on this, it is believed that a supplementary budget could have been formulated to reduce the issuance of government bonds.'
In response, a Ministry of Economy and Finance official remarked, 'The only times we have conducted expenditure restructuring in the first half of the year were twice during the COVID-19 period.' They explained that 'it was clear that certain projects would not be executed due to the pandemic.' However, the amount adjusted by the government at that time for projects difficult to execute due to COVID-19 was only 300 billion won.
As a result of this supplementary budget, the government will issue 205.6 trillion won in government bonds this year. This figure is an increase of 8.1 trillion won from the previous plan of 197.6 trillion won and is larger than the amounts issued during the eight supplementary budgets from 2020 to 2022 (approximately 160 trillion to 180 trillion won). If an additional supplementary budget follows the change in government in the second half of the year, borrowing may increase further.
Given the significant volume of government bonds that need to be issued, timing is expected to be crucial. Recently, U.S. President Donald Trump announced that he would impose tariffs of up to several thousand percent on key countries reporting trade surpluses with the U.S., causing fluctuations in global financial markets.
It is also regrettable that the timing for inclusion in the World Government Bond Index (WGBI), which can secure global passive funding, has been pushed back from November of this year to April of next year. Based on the share of funds tracking the WGBI and the ratio of South Korea within that index, it is estimated that 75 trillion to 90 trillion won in foreign funds will flow into Korea through index inclusion. The Ministry of Economy and Finance plans to determine the volume of bond issuance based on market conditions.
Meanwhile, the National Assembly's Budget Policy Office also pointed out that the Ministry of Economy and Finance incorrectly estimates the surplus of the Bank of Korea every year. The surplus of the Bank of Korea refers to the funds that remain after deducting legal reserves from net income, which are then paid to the government as revenue. Although the Ministry of Economy and Finance estimated that the Bank of Korea's surplus would reach 4.2 trillion won this year, the actual amount was 5.4491 trillion won.
From 2020 to 2023, the actual receipts exceeded the estimates given by the Ministry of Economy and Finance each year. In particular, in 2022, there was an excess receipt of 1.4466 trillion won, while last year there was a shortfall of 707.9 billion won. There is a difference of around 1 trillion won each year. The National Assembly's Budget Policy Office stated, 'The surplus of the Bank of Korea is the largest among the non-tax revenue in the general account,' and warned that 'overestimation or underestimation could hinder the efficient operation of finances.'