Finance ministry faces uphill battle as economic control tower without budget authority

Prime Minister Kim Min-seok, sixth from left, and Second Vice Minister of Economy and Finance Lim Ki-keun, seventh from left, pose with other dignitaries after unveiling the signboard of the newly established Ministry of Planning and Budget at Government Complex Sejong, Friday. The ministry operates under the Prime Minister’s Office, with Lim serving as the acting chief. Yonhap

The Ministry of Economy and Finance faces a daunting challenge in serving as the control tower for Korea’s economic rebound this year after losing authority over the national budget, a key tool for implementing recovery plans.

Budget control was transferred Friday to the newly established Ministry of Planning and Budget, which operates under the Prime Minister’s Office.

The separation is part of President Lee Jae Myung’s administrative reform agenda. While the Ministry of Economy and Finance retains responsibility for macroeconomic policy and taxation, political and economic experts say its influence has been significantly weakened, as budget authority is central to coordinating and enforcing economic policy across government.

“A leader can be far less influential if they are tasked with a project that requires massive funding but lack control over the money,” said Shin Il-soon, a professor of economics at Inha University.

The concern comes as the government rolls out a 727.9 trillion won ($503.38 billion) budget for 2026, up 8.1 percent from the previous year, with a strong focus on a full-scale artificial intelligence (AI) transformation across all sectors of society.

The economic blueprint includes 15 flagship projects spanning four areas — businesses, the public sector, citizens and infrastructure — under a broader goal of achieving 3 percent potential growth.

An economist, who spoke on condition of anonymity, said budget authority is “increasingly crucial under the current government,” noting its expansionary fiscal stance and an average 5 percent annual increase in government spending expected during Lee’s five-year term.

“Under these circumstances, the Ministry of Economy and Finance appears to have few effective tools to influence policy aside from taxation,” the economist said.

Some experts also warn that placing the budget ministry under the Prime Minister’s Office could expand the influence of the presidential office and politicians from the early stages of budget preparation.

“The Prime Minister’s Office and its affiliated bodies follow the presidential office, making it likely that the budget office will be affected,” said Shin Yul, a professor of political science at Myongji University.

Ahn Dong-hyun, a professor of economics at Seoul National University, added, “Placing the ministry responsible for budget preparation under the Prime Minister’s Office gives the impression that budget functions are being downgraded to a mere disbursement organization following top-level orders.”

Some political sources said the presidential office may intervene directly if disagreements arise between the Ministry of Economy and Finance and the Ministry of Planning and Budget over how to allocate funds for the government’s economic road map.

To improve coordination, discussions are underway to launch a three-way consultative body led by the two ministers and the Financial Services Commission chairman.

Meanwhile, Finance Minister Koo Yun-cheol downplayed concerns over the ministry’s weakened role. “I do not believe any related problems will arise,” he said. “We will operate the system carefully and ensure synergy with all relevant ministries.”