Cheong Wa Dae on the 26th said in connection with the more than 100 trillion won "future response fund," to be created with excess tax revenues, "Because additional tax revenues are not a structure that will be accumulated permanently, we will set and allocate programs on a time series of about three to four years and seek results." The plan is to channel tax revenues collected beyond expectations thanks to a semiconductor boom into a fund, not to make it a permanent fiscal expenditure tool, and to invest in areas where concentrated short-term results can be achieved.
◇ It is a "future response," but "not a permanent fund, focused operation for 3–4 years"
A Cheong Wa Dae official met with reporters at Chunchugwan that day and said, "We do not consider the future response fund to be a permanent fund," adding this. Programs that require continuous expenditure, like "welfare budgets," will go through the general account, while investment will be concentrated in future growth areas where results can be seen on a three- to four-year basis. The official also said, "The future response fund is intended to allocate programs centered on areas where our government can place priority within a limited period."
As for why the government is creating a fund instead of drafting a supplementary budget, which requires National Assembly approval, the official said, "It is not responsible fiscal management to spend everything when tax receipts are high, as past governments did, and not spend when they are low." The official also said that if tax revenues collected beyond expectations due to the semiconductor boom are set aside in a fund, the need to issue Government Bonds will be reduced and the effect on managing debt will be significant.
◇ "Issuance of Government Bonds will be reduced considerably"
However, the official kept some distance from using the future response fund directly to repay government debt. The official said, "Repaying government debt is not an obligation," and added, "If we allocate the budget through the fund, we will significantly reduce the portion of Government Bonds issuance." The official also said, "There is an inevitable aspect to maintaining government debt at a manageable level, and rather than issuing new debt to repay debt, we judged that 'if spending 10,000 won today can make 100,000 won tomorrow, investing is appropriate,' which is why we are creating the fund."
The official added, "It is not that there is no plan at all for soundness in government debt," saying, "We reduced some Government Bonds even in the supplementary budget and plan to somewhat reduce Government Bonds next year as well."
At the same time, the official said next year's issuance of Treasury bonds will not be cut sharply. The official said, "Korea's Government Bonds market is still rather small, and personally I think the Government Bonds market needs to get bigger," adding, "There is a role Government Bonds must clearly play as a benchmark rate or benchmark bond."
The point is to maintain an appropriate level because sharp swings in Government Bonds issuance depending on tax revenue conditions could undermine market stability. The official added, "If the scale suddenly shrinks, there will be difficulties because there are fewer products that serve as anchors in financial markets," and said, "There is a need to manage Government Bonds issuance appropriately. Government Bonds will be issued stably next year as well."
◇ Active explanation on the controversy over a "100 trillion slush fund"
According to the government's preannounced "bill on the establishment and operation of the future response fund," the fund's accounts are divided into five: ▲ general ▲ youth ▲ growth engines ▲ regions ▲ education and talent. The method is to first put the fund into the general account and then allocate finances to be used for each program account. The bill roughly specifies the program areas of the accounts, and each of the five accounts carries a proviso allowing use for "other programs prescribed by presidential decree." Unlike laws, presidential decrees are not subject to enactment or amendment by the National Assembly.
Addressing concerns that Cheong Wa Dae or the government will spend finances at will, the official said, "Because the future response fund is also a fund, the National Assembly does not examine everything." The official added, "While discretion is originally recognized for all executive-branch funds, that does not mean they can be used at will without the National Assembly's permission," and said, "From the moment the fund is created to the process of using it, it is subject to the National Assembly's review and control. Even if prescribed by presidential decree, it cannot deviate from the fund's original nature."
The government is pushing to amend the National Finance Act to raise the limit for changes to the future response fund's operation plan to "up to 30% of the total amount by program." Generally, business-type funds are 20% and financial-type funds are 30%. Cheong Wa Dae explained that this is similar in nature to a contingency reserve in the general account. After the budget is finalized, up to 30% of a program's amount does not require additional National Assembly review.
A Cheong Wa Dae official said, "Because the future response fund has characteristics of both business-type and financial-type funds," but added, "It is not finalized. It can be decided through discussion in the National Assembly."