Ryu Deok-hyeon, the Blue House's financial planning advisor, explained on September 3 that the 162 trillion won Future Response Fund is intended to serve as a "financial reservoir" to be used steadily over the next two to three years, rather than depleting excess tax revenue all at once.
During an appearance on KBS Radio's "Sasa Geon Geon," Ryu stated, "This year and next year, the tax revenue conditions are very favorable. Corporate taxes are significantly boosted by the semiconductor boom, and overall, we are seeing substantial excess tax revenue and additional income."
He added, "Just because we have a lot of revenue, is it really wise to spend it all? If we do that, while monetary policy tightens, fiscal policy would expand significantly, which may not be desirable."
Ryu also expressed caution regarding the proposal to use all excess tax revenue for national debt repayment. He noted, "The national bond market needs to maintain stability. If we pay off all the debt next year without issuing any bonds, we would have to issue the same amount or more in the following year, which could jeopardize fiscal health."
He explained that the fund should be used adequately for necessary fiscal needs next year while being managed stably, allowing for temporary storage of resources to be used over two to three years.
Addressing concerns that the Future Response Fund could bypass the National Assembly's budget review authority, Ryu dismissed this as a "complete misunderstanding." He emphasized, "All government budgets and funds must undergo National Assembly review. Projects funded by the Future Response Fund will also be subject to this budget review process."
Ryu highlighted that the Future Response Fund could play a role in stabilizing finances if tax revenues decline due to a downturn in the semiconductor market. He remarked, "It would be great if the semiconductor cycle remains strong, but that is uncertain. At some point, tax revenues could decrease significantly."
He added, "We have also established mechanisms to draw from the Future Response Fund to address any shortfalls in tax revenue."
In response to criticisms that the proposed budget of 820.9 trillion won for next year represents excessive expansion, Ryu countered, "I believe next year is a crucial turning point for the South Korean economy. We need fiscal investment to address the lack of future investment over the past three years, reverse the decline in potential growth rates, and respond to polarization amid the semiconductor boom."
He specifically noted, "Next year, the managed fiscal balance deficit is projected to be 0.1%, which is a very balanced policy not seen in the last 20 years." He added, "It is difficult to agree that this is entirely expansionary."
Regarding the recent resignation of Kim Yong-beom, the former head of the Blue House Policy Office, Ryu indicated that there would not be significant changes in the fundamental direction of economic policy. He stated, "Government policies do not change drastically in a short time. We need to continue navigating in the direction set by our government."
On the timing of appointing a successor to the Policy Office, Ryu said, "I believe the will of the appointing authority will be determined soon. It is an important schedule."
* This article has been translated by AI.
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