The government plans to increase the size of the Inter-Korean Cooperation Fund for next year to over 1 trillion won. Under the Moon Jae-in administration, the fund reached about 1.2 trillion won, but it was reduced to around 800 billion won under the Yoon Suk-yeol administration. As inter-Korean relations have cooled, the size of the fund has also decreased. The Lee Jae-myung administration has expressed its intent to improve inter-Korean relations by increasing the Inter-Korean Cooperation Fund by more than 200 billion won in its first budget.
Although the size of the Inter-Korean Cooperation Fund has been increased by more than 25%, the budget for official development assistance (ODA) aimed at helping developing countries has been significantly reduced. The Lee Jae-myung administration referred to this adjustment as "normalization."
On the 29th, the government deliberated and approved the '2026 budget proposal' reflecting foreign affairs and unification budget details at a Cabinet meeting chaired by President Lee Jae-myung.
The budget for foreign affairs and unification was the only one among the major 12 areas in next year's budget proposal to be cut. This year, the budget for foreign affairs and unification was set at 7.7 trillion won, which will be reduced to 7 trillion won next year, a decrease of 9.1%.
The area that was cut the most was the ODA budget. The total budget for ODA next year will be 5.3573 trillion won, which is an 18.6% decrease compared to this year's 6.5835 trillion won.
In particular, the 'humanitarian aid' budget within the ODA, aimed at helping refugees affected by war or disaster, was halved from 677.5 billion won to 331.5 billion won. The discretionary contributions paid to international organizations also saw a reduction from 383.3 billion won to 280.7 billion won, a cut of 26.8%. A Ministry of Economy and Finance official explained, "We have normalized the humanitarian aid and discretionary contributions to international organizations that were temporarily expanded due to COVID-19 and the war in Ukraine."
On the other hand, the Inter-Korean Cooperation Fund, which was 798.1 billion won this year, will increase to 1.03 trillion won next year. The Ministry of Economy and Finance explained that the fund was expanded for the sake of people's livelihoods and economic cooperation.
Recently, President Lee and U.S. President Donald Trump discussed ways to resume dialogue with North Korean leader Kim Jong-un during a summit held in Washington, D.C. It is speculated that if North Korea comes to the negotiating table through South Korea-U.S. cooperation, economic cooperation and human exchanges between the two Koreas could resume.
However, since North Korea continues to maintain its position of refusing dialogue, stating "there will be no meeting with South Korea" through statements from Kim Yo-jong, there are concerns about whether the Inter-Korean Cooperation Fund will be properly executed. A Ministry of Economy and Finance official explained, "We expanded the size of the Inter-Korean Cooperation Fund to reflect our commitment to working for improvements in inter-Korean relations."