(Sejong = News 1) Reporter Jeon Min = The prospect that the government will prepare a ‘Cherry Blossom (Spring) Supplementary Budget’ worth more than 10 trillion won is gaining strength, but the government’s concerns over securing financial resources are expected to deepen.
This is because last year’s national financial results showed that the actual available financial resources that the government can immediately mobilize are less than 100 billion won.
Even the foreign exchange equalization fund (foreign exchange fund) and the issuance of deficit government bonds, which were used as ’emergency funds’ in the past, are blocked by market conditions such as high exchange rates and high interest rates, so we are in fact facing a ‘financial cliff’.
As President Lee Jae-myung has drawn the line that there will be no supplementary budget through the issuance of large-scale deficit government bonds, the observation that ‘expenditure restructuring’, which involves reducing projects that are difficult to execute within the year from the existing budget, is inevitable in order to prepare the supplementary budget, is gaining weight.
Available surplus ‘a little’… The foreign exchange fund is also tied to the exchange rate of 1,450 won.
According to the Ministry of Finance and Economy on the 12th, as a result of the government’s recently concluded total revenue and total expenditure settlement for the 2025 fiscal year, the general accounting global surplus was confirmed to be approximately 100 billion won.
The total global surplus is 3.2 trillion won, but 3.1 trillion won of this is for special accounts whose use is tied up. The remaining 100 billion won in general accounting surplus cannot be freely used in its entirety. This is because, according to the National Finance Act, priority must be allocated to local allocation taxes and grants, contribution to the public fund repayment fund, and debt repayment.
Accordingly, excluding legally mandated expenditures, the actual amount of money that can be utilized as supplementary budget resources is expected to be less than 50 billion won. The scale is far from sufficient to organize a supplementary budget worth trillions of won.
Previously, President Lee Jae-myung announced his policy of ‘no supplementary budget to issue large-scale deficit government bonds.’ Accordingly, predictions have been raised in the financial markets that global surpluses, rather than deficit government bonds, will be the main source of funds for the supplementary budget.
Usually, when there is a shortage of surplus funds, the government has made up for the shortfall by using the surplus resources of the fund or issuing deficit government bonds.
A representative means of circumvention is the foreign exchange fund. The government has a precedent of diverting 2.8 trillion won in foreign investment fund resources to the general account during the supplementary budget for emergency disaster relief funds in 2020. Even when there was a tax revenue deficit in 2023 and 2024, the fiscal gap was filled by utilizing surplus funds such as foreign exchange funds.
But now the situation is different. As the high exchange rate trend continued, with the dollar-won exchange rate fluctuating in the mid to high 1,400 won range, the foreign exchange authorities’ range of maneuver has narrowed. It is pointed out that it is difficult to tear down the foreign exchange fund and use it for fiscal expenditures at a time when it is necessary to secure sufficient ‘real ammunition’ (foreign currency resources) to defend the exchange rate.
Due to interest rate fluctuations, deficit government bonds are also burdensome… Alternative to ‘expenditure restructuring’ discussed
The bond market is also reacting sensitively. The market already reflects the possibility of large-scale government bond issuance and reflects this in interest rates.
According to the Korea Financial Investment Association, the interest rate on 3-year government bonds, which was around 2.9% at the beginning of the year, recently soared to the mid-3.2% range. The long-term 10-year interest rate also jumped from 3.3% to 3.6% per annum during the same period. The analysis is that concerns about an increase in government bond volume due to the supplementary budget have driven up interest rates.
In this situation, concerns are raised that if the government rashly prints deficit government bonds, it could further stimulate market interest rates to rise, increasing the interest burden on households and businesses.
In the end, it is assessed that the government’s options are limited amid the ‘triple hardship’ of smaller surplus than expected, foreign currency funds with greater restrictions, and difficulty in issuing deficit government bonds due to interest rate burden. Accordingly, there is a growing possibility that the government will consider the ‘expenditure restructuring’ card.
This is a method of securing supplementary budget resources by reducing the budget of projects that are difficult to execute within the year or whose schedules can be adjusted among the projects reflected in this year’s main budget. The goal is to secure financial resources by preemptively adjusting project budgets that may be unused.
However, since the government has already carried out intensive restructuring while preparing this year’s budget, some have pointed out that it may not be easy to secure additional financial resources of around 10 trillion won.
A government official said, “There is no specific discussion on the supplementary budget within the government yet,” and “In principle, there are various ways to raise financial resources, such as adjusting existing business budgets in addition to using deficit government bonds and funds.”
min785@news1.kr
date: 2026-02-11 21:16:00
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