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President Park Calls for Fiscal Reform to Reduce Country's Debt
Pay As You Go
President Park Calls for Fiscal Reform to Reduce Country's Debt
  • By Cho Jin-young
  • May 14, 2015, 02:00
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Korean President Park Geun-hye.
Korean President Park Geun-hye.

 

President Park Geun-hye called for efforts to accelerate fiscal reforms to reduce the nation’s debts on May 13. Park made reference to pay-as-you-go rules to ensure fiscal soundness in a fiscal strategy meeting at the presidential office.

The pay-as-you-go rules are a system widely practiced in the United States and other advanced countries, in which any spending increase directly created by a new law or revision must be offset by other spending decreases or revenue increases.

President Park also stressed, "We need to speed up fiscal reforms to minimize the public's burden, secure economic revitalization and support the public's livelihoods," hoping that the National Assembly would quickly pass relevant bills for the rules.

Korea's operational fiscal balance has been in the red since 2008, reaching a peak in 2009, when it surged to 43.2 trillion won (US$39.5 billion). The balance for the January-November period last year was negative by 30.2 trillion won (US$27.6 billion).

She also called for the government’s efforts to maintain the country's fiscal health to raise welfare spending, given the country's fast-aging population. Korea became an "aging society" in 2000, when the amount of retired people in the country topped 7 percent. Around 2026, at least 20 percent of the people are expected to be over 65.

The concern has been expressed that the aging population could pose a serious threat to the nation's economy, coupled with a low birth rate, as it could lead to fewer working people and more spending on health and welfare.

President Park also called on the public sector to adopt the wage peak system first in order to help the private sector take up on the system that is designed to provide job security for older employees through a gradual wage cut after a certain age.