Finance ministry's authority shrinks as it fails to get financial policymaking function

The Ministry of Economy and Finance building at Government Complex Sejong / Yonhap

The Ministry of Economy and Finance is facing a significant loss of influence after the Lee Jae Myung administration's restructuring left it with taxation as its sole remaining lever of economic authority, industry officials said Friday.

The initial proposal sought to transfer domestic financial policy functions from the Financial Services Commission (FSC) to the ministry to align them with macroeconomic policies, while assigning budgetary authority to a newly established office under the prime minister.

However, following high-level talks between the presidential office and the ruling Democratic Party of Korea on Thursday, the government decided to maintain the current structure of the FSC.

The decision dealt a blow to the finance ministry, stripping it of both budgetary control and financial policy authority. Of the three key levers of economic policy in Korea — budgeting, taxation and finance — only taxation will remain under the ministry's oversight.

The new system is expected to take effect next January.

Ministry officials had earlier viewed the transfer of financial policy functions as a means to offset the ministry's loss of budget authority. But concerns that the move could expand its power, contrary to Lee's intentions, appear to have prompted the government to maintain the status quo for the FSC.

The reorganization plan was one of Lee's stated goals for his presidency, dating back to his campaign, to curb the finance ministry's "excessive" authority.

For years, critics have said the ministry acted as a de facto "superior ministry," exerting outsize influence over budgeting and interagency coordination.

Its reach extended well beyond the public sector. Retired officials from the ministry — often referred to as the "Mofia," a portmanteau of "Ministry of Finance" and "mafia" — have gone on to hold powerful roles in public organizations and financial institutions, helping to shape economic policy from outside the government.

In a clear break from tradition, Lee has not appointed senior finance ministry officials to lead agencies such as Statistics Korea, the Korea Customs Service or the Public Procurement Service. The shift signaled a broader attempt to reduce the ministry’s dominance, even before the latest restructuring.

The finance ministry said in a statement that the new agency would continue to serve as the nation's economic "control tower." It added that once the legislation is finalized, it would consider ways to "strengthen the function of coordinating overall economic policy."

Frustration is mounting within the ministry, with some insiders saying it is the biggest loser under the restructuring plan.

"With the budget function siphoned off, by what mechanism and in what way will the organization be strengthened? Isn’t it normal that when functions are reduced, the role also diminishes?" a ministry official said. "I wonder what kind of groundbreaking measure could possibly strengthen its role, despite a reduction in functions."