Seoul seeks 6.5% hike in spending next year
September 28, 2005 ㅡ The administration says it wants to increase government spending to 221.4 trillion won ($213.7 billion) next year. A side effect of the budget proposal would be to increase the national debt to a record level ― 280 trillion won by December 2006.
The budget draft for fiscal year 2006 was approved at a cabinet meeting yesterday. It will be sent to the National Assembly early next month for approval, and calls for a 6.5 percent increase in spending. Major beneficiaries of increases are programs for social welfare, defense and research and development.
The Budget Ministry said funds for research and development would rise 15 percent next year, with spending on social welfare up 11 percent and on defense up 9.8 percent.
Tax revenue will increase 4.1 percent to 136 trillion won in 2006, the Finance Ministry said, slower growth than this year’s 7 percent increase over 2004. The per-capita tax burden would increase from this year’s 3.4 million won to 3.6 million won.
The 2006 revenue estimates are based on 5-percent economic growth this year, although the Finance Ministry concedes that this year’s growth will be only about 4 percent or slightly less.
Because tax revenues will not cover the increased spending, the Budget Ministry said, Seoul will issue 9 trillion won worth of government bonds next year. That would help push Korea’s national debt up by nearly 13 percent, to nearly 32 percent of gross domestic product. But that national debt is a gross figure, not taking Korea’s substantial foreign currency reserves into account.
Brushing aside concerns over the growing debt, Byeon Yang-Kyoon, the budget minister, said most rich nations had a much higher ratio of debt to gross domestic production.
He added that the ratio would peak next year and then would fall to 30 percent in 2009.
The government forecast a surplus in the nation’s consolidated budget, which includes the operation of state-run funds and general and special accounts, but said the surplus will drop from 6 trillion won this year to 2.2 trillion won in 2006.