By Lee Hyo-sik
Staff Reporter
The government has decided to slash this year's fiscal budget by 2.5 trillion won through a more efficient management of state-run projects and a cut in labor costs. It plans to spend the money on boosting domestic demand and stabilizing the livelihoods of low-income earners, as the economy is slowing on stagnant corporate investment and private spending.
The Ministry of Strategy and Finance said Tuesday it will raise 2.2 trillion won by cutting ordinary expenditure and 300 billion won by reducing labor costs. The previous Roh Moo-hyun Administration set aside 257.3 trillion won for this year's fiscal budget.
The ministry wants to spend 400 billion won to help businesses expand investment; 200 billion won to create jobs and improve living conditions for the lower-income bracket; 400 billion won to strengthen public safety; 800 billion won to provide better administrative services for the public; and the remaining 700 billion won to finance envisioned tax cuts.
Deputy Strategy and Finance Minister Lee Young-geol said the ministry had initially intended to slash the budget by 2 trillion won but increased the amount by 500 billion won. Last month, the ministry said it will reduce the budget by 2 trillion won this year and increase saving up to 18 trillion won next year. It also plans to review all planned state-financed projects under the previous administration.
``The budget saving will be attained through a more precise estimate of state project expenditures, a reduction in procurement costs and the consolidation of similar development schemes,'' Lee said.
The ministry's move is in line with President Lee Myung-bak's pledge to cut the state budget by 10 percent as part of efforts to downside the government and turn it into a more efficient and private business-like organization.
It is also part of government measures aimed at revitalizing the economy, as it is heading downward faster than initially expected amid a global economic slowdown and surging international raw material prices.
President Lee said Sunday that to spur domestic demand, the government will recycle last year's tax surplus, indicating a supplementary budget will be drawn up soon. He said the government will prepare measures before the economy worsens, adding the most critical point is that domestic demand should not shrink more than the actual economy.
In 2007, the central government recorded a 15.3 trillion won surplus in tax income. Up to 4.8 trillion won could be allocated to a revised supplementary budget upon approval from the National Assembly. The fiscal spending of 4.8 trillion won is projected to hike the country's gross domestic product (GDP) by 0.5 percentage points this year.