Government Budget to Top $115 Billion

By Lee Hyo-sik
Staff Reporter

The Korean government expects outstanding national debt to rise to an all-time high of 244.2 trillion won ($212.3 billion) next year, equal to 29 percent of the projected 2005 gross domestic product (GDP) as the Roh Moo-hyun administration plans to run a deficit next year by issuing more bonds.

According to the government’s 2005 budget proposal, state debt will increase by 19.4 percent from this year’s 204.5 trillion, with the ratio of debt to GDP reaching 29 percent, up from 26 percent this year and 23 percent in 2003.
The fiscal budget for next year will jump to 131.5 trillion won (about $115 billion), up 9.5 percent from the 120.1 trillion for this year.

The government predicts that its 2005 fiscal deficit will rise to 8.2 trillion won, up 1 trillion won from this year’s estimated shortfall of 7.2 trillion won, due mainly to 6.8 trillion won in the planned issuance of state bonds to make up for a reduction in tax revenues and an increase in debt payments.

The budget proposal is based on the expectation that the economy will grow by 5 percent in 2005, with the ratio of tax to GDP topping 19.7 percent.

The budget proposal, finalized at a Cabinet meeting held at the government complex in central Seoul yesterday, will be submitted to the National Assembly for approval on Oct. 2.

The plan stipulates that to boost the nation’s economic growth potential, the government will increase spending on research and development (R&D) projects in the field of science and technology by 14.3 percent to 15.1 trillion won next year.

Defense spending is expected to rise by 9.9 percent to 20.8 trillion won next year for the improvement of self-defense capabilities in the face of the planned withdrawal of more than 10,000 U.S troops from South Korea.

About 25.3 trillion won will be used to improve the living conditions of the poor, who have been affected most by the sagging economy, and reinforce environment conservation efforts.

Local governments will receive a total of 36.1 trillion won, up 70.8 percent from this year, for implementing various projects to achieve balanced regional development, with 510 billion won allocated to streamlining the government’s administrative services.

Salaries paid to the nation’s civil servants are expected to total 19 trillion won, up 6 percent from this year as the government plans to hire more police officers and teachers.

leehs@koreatimes.co.kr