This study examines how the practice of budget-making and fiscal decision-making in Korea have changed over time and amid Korea’s economic development, and provides suggestions for their improvement.
National finance and public fiscal policies are issues that garner attention not only in Korea, but around the world. There is a tendency toward “small government” worldwide, particularly in the Western and developed countries. For example, the British Parliament has been introducing measures with the goal of reducing the national fiscal ratio of the gross national product (GNP) from 44.3 percent to 40.7 percent by 1984. The Reagan administration of the United States has also set out to reduce the fiscal ratio, now at USD 54.5 billion, by more than USD 500 million by 1984. Although France has opted for a slightly different course of policy choices and decided to increase its fiscal resources through a series of nationalization projects, it is also searching for ways to cut spending, faced with rising inflation. Japan continues to strive to ensure greater efficiency of the policy projects carried out on its national annual budget of JPY 250 billion.
The fiscal spending-to-GDP ratios in these countries have been growing between the 1950s and the 1970s, from 32.3 percent to 34.45 percent in Great Britain, from 25.9 percent to 35.1 percent in the United States, and from 25 percent to 46.4 percent in Denmark. Although the Reagan administration has launched new measures to combat the current recession, these measures have seen little success, and are causing the administration to consider providing an additional assistance amounting to USD 13 billion.
Although Korea is not yet ready to pursue the ideal of “small government,” Korean policymakers are also attempting to ensure greater efficiency and minimize waste in government spending. In Korea, public finance relies mostly on taxes and other contributions from citizens. Therefore, an increase in spending translates directly into increased financial burdens on households. Hence, it is crucial for the Korean government to find new sources of revenue and budgets that do not impose additional burdens on the Korean people. Throughout the 1960s, the Korean government managed to keep both its budget and spending around KRW 50.5 billion on average, but spending dramatically increased to KRW 7.7188 trillion by the early 1980s. The spending-to-GNP ratio has also risen from 18.9 percent in the 1960s to 21.1 percent by 1980.
Public spending is playing an increasing and increasingly important role in the national economy. As the demand for non-exclusive and indivisible public goods is increasing, the Korean government will be compelled to increase its budget and spending even more dramatically in the coming decades. However, it should not rely solely on the taxes and contributions from citizens to fund its public spending programs, and may need to curtail spending from time to time by introducing new regulatory measures.
국가예산과 재정(National budget and finance)
|Journal Title; Vol./Issue||한국개발연구:vol. 3(no. 4)|
|Subject Country||South Korea(Asia and Pacific)|
|Subject||Economy < Financial Policy|
|Holding||KDI; KDI School|