Concerns rise over budget minister nominee’s fiscal policies

Park Hong-keun, third from left, nominee for Minister of Planning and Budget, answers questions in front of the office set up for his confirmation hearing in Seoul, Tuesday. Yonhap

Concerns over the country’s fiscal discipline are growing, prompted by the nomination of four-term ruling Democratic Party of Korea (DPK) lawmaker Park Hong-keun to lead the Ministry of Planning and Budget, market watchers said Tuesday.

Many say the close aide to President Lee Jae Myung is largely expected to advance Lee’s expansionary fiscal drive, which includes the drafting of a supplementary budget, with long-term fiscal prudence potentially being undermined by short-term political objectives.

Also concerning to some is the diminished power of Finance and Economy Minster Koo Yun-cheol, whose role overseeing broader macroeconomic policies and economic growth plans will be eclipsed by Park’s budget-backed agendas.

“I will outline a sustainable fiscal policy to support the Korean economy, which is facing low growth, demographic challenges and widening inequality,” Park said before entering the site of his confirmation hearing in Seoul.

Under his leadership, he added, the ministry will strengthen its long-term strategy, prioritizing future industries.

“The ministry’s future strategy functions will be strengthened to plan 30 years ahead, reinforcing strategic capabilities for national transformation and creating growth engines for a hyper-innovative economy, including artificial intelligence (AI) and robotics,” Park said. “Fiscal resources are not a bottomless well.”

He added that the ministry must “allocate taxpayer money where it is most needed while boldly cutting unnecessary and non-urgent spending,” indicating a commitment to expansionary fiscal policy.

Park is widely seen as the architect of the Lee administration’s fiscal blueprint, having helped design the new budget framework during the presidential transition.

He is expected to accelerate major state-led development initiatives and additional stimulus measures.

Opposition party lawmakers said Park’s appointment could expose public finances to populist pressures at a time when Korea’s debt-to-GDP (gross domestic product) ratio exceeds 50 percent.

The budget ministry said the months of leadership vacuum would come to an end soon, restoring government functions of budget guidelines and national fiscal strategies.

Park’s nomination comes after the withdrawn nomination of scandal-fraught Lee Hye-hoon in late January. Allegations against her included workplace abuse, suspicious real estate activity and family-related advantages in education, housing and employment.

The extra budget is far from being warranted, according to Lee In-ho, former professor of economics at Seoul National University.

“I understand there are widespread projections that a supplementary budget could be drawn up between this month and May. However, Korea’s growth this year is forecast at around 2 percent, a figure greater than the country’s potential. A stimulus-focused supplementary budget is not necessary — not at the expense of fiscal soundness,” he said.