South Korea will start providing free high school education from next year, one year ahead of the original schedule. High school students will be exempted from education expenses, including admission fee, tuition fee, and textbook fee. The government and the ruling Democratic Party had a policy coordination meeting Wednesday and agreed to maintain an expansionary fiscal policy next year. They also agreed to increase support for the socially disadvantaged, such as installing high-speed Internet on islands and in remote rural areas, and expanding employment insurance coverage to workers and artists in special employment.
The free high school education program, which was planned to be fully implemented in 2022, has been moved up by one year. It is expected to cost 2 million won annually, 1.6 million won per each student, when fully implemented. This is not a small amount of money considering it is 3 percent of the country’s total annual education budget of 70 trillion won. It needs to be carefully reviewed if it is appropriate to push up the schedule of the free high school education program when there are many areas requiring an emergency budget injection and the public purse is being depleted.
The government’s budget plan for next year, which will be submitted to the National Assembly on next Thursday, is expected to be over 550 trillion won. The national budget has increased by about 9 percent for the third consecutive year since 2019. It is a sharp increase considering that the budget has grown larger by an average of 4.5 percent for three years since 2019. This is an increase of more than 150 trillion won (37%) during the four years President Moon Jae-in has been in office from 400 trillion won in 2017.
On the other hand, tax revenue is shrinking due to the pandemic-induced economic slowdown. The country’s tax income has declined to 132.9 trillion won for the first half of the year, down 23.3 trillion won from the same period of last year. The country is expected to post a fiscal deficit this year and next year. The debt-to-GDP ratio has soared to 43.5 percent this year after the third extra budget. The government has failed to keep its pledge made two years ago to keep the debt-to-GDP-ratio at 40 percent. If this trend continues, the country’s fiscal integrity will be put at risk.
Public finance is the last resort for South Korea, an open economy, to maintain national credibility and economic stability. A surge in national debt will not only put a burden on future generations but also hurt the country’s macroeconomic stability. Amid a resurgence of COVID-19 in the country, the government is discussing whether to grant disaster relief money once again and more areas are in need of government assistance. This is why the country’s top economic policymaker Hong Nam-ki should take an objective stance and avoid unnecessary government spending.