South Korea is to cut its national budget for the first time in 13 years next year, as Seoul seeks to tighten spending amid rising interest rates globally.
The South Korean government would “significantly trim” national spending for next year from this year’s 679 trillion won (US$521.4 billion), South Korean Minister of Finance Choo Kyung-ho said on Saturday.
South Korea has increased government spending every year since 2010, especially under the administration of former president Moon Jae-in, who took office during the COVID-19 pandemic, Choo said.
Photo: AP
“We are tightening our belt,” he said. “The former administration had a lot of debts, and we can’t do that.”
South Korea President Yoon Suk-yeol has sought to cut spending and increase tax revenue since taking office in May.
While the Bank of Korea has increased key policy rates four times this year to 2.25 percent, the nation’s inflation accelerated last year and the central bank governor indicated earlier this month that there would be a possible 25 basis point rate increase.
Choo warned of “a record drop” in public expenditure and said total government bond issuance would be reduced too, without providing a figure.
Ministers and vice-ministers would have to return 10 percent of their salaries to the government as part of the efforts, he said.
South Korea’s inflation seems to be nearing a peak, which Choo said he believes is about 6 percent.
“Some people say inflation may reach 7 percent, but I don’t think that will happen unless a tremendous disaster occurs,” Choo said.
Separately, Samsung Electronics Co vice chairman Jay Y. Lee on Friday won a presidential pardon from graft charges, allowing him to formally take the helm of an electronics conglomerate roiled by global demand and supply shocks.
Yoon cleared the heir to the country’s biggest company of bribery charges, for which Lee spent 18 months in prison before his release on parole a year ago.
The decision clears the way for South Korea’s most prominent business scion to officially take the reins of the world’s biggest maker of memory chips and smartphones.
Lee’s return is regarded as a stabilizing force for an economy buffeted by inflation, market disruption from Russia’s war in Ukraine and logistics snarls triggered by China’s COVID-19 lockdowns.
Rising tensions between the US and China over chip technology also complicate long-term plans for Samsung, which runs major fabs in the two largest economies.
Lee on Friday apologized to the public and promised to “start anew.”
“I will try harder to give back to society and grow together,” Lee said in a statement.
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