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[Editorial] Debt management
Stimulus does not mean problems can be ignored
By Korea HeraldPublished : Oct. 30, 2014 - 20:45
In her address to the National Assembly on Wednesday, President Park Geun-hye called for legislative support for her efforts to revitalize the country’s sluggish economy. She said her administration would risk further piling up fiscal deficits to spend money needed to pull the economy out of the protracted downturn.
In September, the government submitted a 376 trillion won ($361 billion) budget plan for next year, up 5.7 percent from this year. In a meeting following her speech, the president and leaders of the two main political parties agreed on the parliamentary passage of the budget bill by the Dec. 2 legal deadline. Her economic team has drawn up a separate stimulus package aimed at injecting 41 trillion won into the sluggish economy.
In Wednesday’s address, Park said it would be difficult for the economy to avoid a vicious circle of low growth if the government froze its expenditure at a time when households and corporations could not afford to spend more. She noted that the budget deficit and national debt would be reduced as more fiscal spending helped reinvigorate the economy and increase tax revenue.
These remarks reflected her concern that Asia’s fourth-largest economy might be drawn into long-term stagnation without drastic efforts to reverse its downturn. Her sense of urgency should certainly be shared by all politicians, who are urged to pass a set of bills aimed at revitalizing the economy and supporting people’s livelihoods within the ongoing parliamentary session.
Still, it seems that Park’s parliamentary speech ought to have addressed the country’s mounting debt problems in a more serious manner.
Recent data compiled by a ruling party lawmaker forecast that Korea’s national debt would increase by about 216 trillion won ($206.3 billion) to 659.4 trillion won over her five-year term, which ends in February 2018. The estimated increase is much larger than the debt expansions under previous administrations. Particularly worrisome is that debt is growing faster than tax revenue.
Persistent and strenuous efforts should be made to overhaul the public sector to slash its wasteful spending. The work to reform the unsustainable pension scheme for civil servants must be completed by the end of this year.
The government should also be more swift and thorough in lifting unnecessary regulations to encourage major companies hoarding large amounts of cash to expand their investments.
In September, the government submitted a 376 trillion won ($361 billion) budget plan for next year, up 5.7 percent from this year. In a meeting following her speech, the president and leaders of the two main political parties agreed on the parliamentary passage of the budget bill by the Dec. 2 legal deadline. Her economic team has drawn up a separate stimulus package aimed at injecting 41 trillion won into the sluggish economy.
In Wednesday’s address, Park said it would be difficult for the economy to avoid a vicious circle of low growth if the government froze its expenditure at a time when households and corporations could not afford to spend more. She noted that the budget deficit and national debt would be reduced as more fiscal spending helped reinvigorate the economy and increase tax revenue.
These remarks reflected her concern that Asia’s fourth-largest economy might be drawn into long-term stagnation without drastic efforts to reverse its downturn. Her sense of urgency should certainly be shared by all politicians, who are urged to pass a set of bills aimed at revitalizing the economy and supporting people’s livelihoods within the ongoing parliamentary session.
Still, it seems that Park’s parliamentary speech ought to have addressed the country’s mounting debt problems in a more serious manner.
Recent data compiled by a ruling party lawmaker forecast that Korea’s national debt would increase by about 216 trillion won ($206.3 billion) to 659.4 trillion won over her five-year term, which ends in February 2018. The estimated increase is much larger than the debt expansions under previous administrations. Particularly worrisome is that debt is growing faster than tax revenue.
Persistent and strenuous efforts should be made to overhaul the public sector to slash its wasteful spending. The work to reform the unsustainable pension scheme for civil servants must be completed by the end of this year.
The government should also be more swift and thorough in lifting unnecessary regulations to encourage major companies hoarding large amounts of cash to expand their investments.
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Articles by Korea Herald
