Leadership vacuum feared to undermine budget ministry's policy drive

Then-budget minister nominee Lee Hye-hoon attends a confirmation hearing at the National Assembly in Yeouido, Seoul, Friday. Yonhap

The Lee Jae Myung administration’s ability to spearhead fiscal reform is facing a major setback, hamstrung by a leadership vacuum at the newly established Ministry of Planning and Budget, which is feared to lead to an overall delay in economic policy drives, market watchers said Monday.

They say it could take at least one to two months for a new candidate to clear the National Assembly confirmation process, subsequently pushing back the government’s plan to frontload 75 percent of the state budget of over 727 trillion won ($505 billion) in the first half of this year.

Central to the issue is former scandal-fraught minister nominee Lee Hye-hoon. President Lee withdrew the nomination late Sunday as allegations mounted, including workplace abuse, real estate speculation, preferential housing subscriptions and family-related advantages in education, university admissions and employment.

Had the nomination been railroaded, the Lee administration would have been under constant pressure, since the compromised leadership and widespread backlash would have undermined functions of coordinating inter-ministerial budgets, enforcing spending as well as pushing forward politically sensitive reforms.

“Property speculation, preferential treatment in university admissions and resorting to illegalities to win highly competitive apartment subscriptions are extremely sensitive issues, certain to sour the public sentiment. These seemingly personal issues would amplify every time the ministry seeks a politically divisive drive," said Lee In-ho, former professor of economics at Seoul National University.

The absence of a budget minister will likely invite pushback from other ministries amid budget cuts and fiscal reform, areas where a strong political leadership is needed.

“A ministry without a minister cannot function properly,” Lee said. “The decision-making process will remain largely adrift, weakening the administration’s broader economic agenda.”

The ministry lacking authority will draw little support from other ministries, putting brakes on the Lee administration’s expansionary fiscal policy. This is a drive that requires a large source of revenue with lingering concerns over a rising risk in debt financing.

It is now operating under an acting minister. However, key decisions requiring minister-level approval and political coordination are likely to stall.

In a statement, the ministry said it would “steadfastly carry out duties to ensure economic transformation, structural reform and the smooth execution of state priorities.”