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| Main opposition Democratic Party of Korea (DPK) Chairman Lee Jae-myung, center, speaks during the party's supreme council meeting at the National Assembly in Yeouido, Seoul, Monday. The opposition-led Assembly from Monday to Tuesday is reviewing the government's proposal to revise the finance law to curb fiscal deficit. Yonhap |
By Yi Whan-woo
The government and the opposition-led National Assembly remain poles apart over the government's push to curb the fiscal deficit and improve financial soundness.
The Assembly's Strategy and Finance Committee is scheduled to begin a two-day review of the law on the fiscal deficit until Tuesday, in line with the government's plan to place a 3 percent ceiling on the ratio of fiscal deficit to gross domestic product (GDP).
The government also seeks to amend the law to lower the fiscal deficit-to-GDP ratio to below 2 percent if the national debt exceeds 60 percent of the GDP.
"Such an overhaul is a mechanism that can safeguard the country's fiscal health and make national expenditure predictable," the finance ministry said in a press release, Monday.
It said a 3 percent ceiling on the fiscal deficit-to-GDP ratio is observed in many advanced economies, including the European Union.
The 60 percent rule concerning the amount of national debt in proportion to the GDP, according to the government, is not "overly strict" considering the cases of other countries.
The finance ministry noted its national debt increased sharply under the previous administration's expansionary fiscal policy. The national debt accounted for 49.6 percent of the GDP last year, up from 35.9 percent in 2018.
It called for support from the Assembly in revising the relevant code, arguing, "The country otherwise will face tougher financial conditions with a rapid population decline and fall in economic growth potential."
Concerning the sovereign rating, the government pointed out credit rating agency Fitch and the International Monetary Fund (IMF) positively assessed its move to reduce the fiscal deficit through amending the law.
But according to sources familiar with the Assembly, the main opposition Democratic Party of Korea (DPK) is against the law revision.
The party views that increasing the national debt may "be inevitable" to some extent considering the economic growth remains sluggish and that pandemic-hit small businesses still require state-led financial support.
"It is believed that the DPK does not want to vote, especially with the Assembly elections coming next year," the source said.
