Posted October. 30, 2008 09:19,
The aftermath of the world financial crisis has spread to the real economy. No one can suggest effective measures to boost the sluggish real economy. After real GDP grew a mere 0.6 percent in the third quarter from the second in recording a four-year low, the Bank of Korea lowered its key interest rate and the government rushed to announce higher fiscal spending next year. Nevertheless, these moves are unlikely to contribute to boosting the economy over the near term.
The government plans to raise the national budget five trillion to seven trillion won (3.5 billion to 4.9 billion U.S. dollars). Before the financial crisis, the government said it would increase next years budget 6.5 trillion won (4.5 billion dollars), or 4.5 percent, to 273.8 trillion won (191.8 billion dollars). According to the new plan, however, the budget will jump to around 280 trillion won (196.2 billion dollars). The government, however, has no source to finance the budget plan. When it set up its first budget plan, it estimated the economy would grow around five percent next year. Many think tanks at home and abroad say growth will fall to the three-percent level next year. The National Assembly Budget Office cut its estimated tax revenue next year by 1.263 trillion won (8.85 billion dollars) from the initial government forecast. The only way for the government to increase its budget is to issue more debt-financing bonds, raising the bond amount from 7.3 trillion won (5.1 billion dollars) to around 15 trillion won (10.5 billion dollars). That will result in a surge in the national debt.
The government should not spend even a small amount of money uselessly. The National Assembly, which will begin its budget deliberation next month, should be on alert to prevent the government from wasting taxpayers hard-earned money. Also, it should manage state funds more strictly. As seen in the rice subsidy scandal, taxpayers money should not be spent without good reason. Moreover, the National Assembly should cut the budget for certain projects that have spent less than 70 percent of this years budget by three trillion won (2.1 billion dollars).
Public officials and lawmakers should not commit a grave sin by repeating their bad practices such as unreasonable budget deliberation and pork barrel politics. Lee Hahn-koo, chairman of the National Assemblys Committee on Budget and Accounts, said, Politicians will struggle to pursue their own interests while arguing that the National Assembly should increase next years budget to boost the economy. The committee should concentrate on helping the nation get out of crisis when they deliberate on the budget.
The economic situation has gotten so bad, Koreans are hesitating to see medical treatment when sick. Instead, they are tightening their purse strings. More people are resorting to crime since they have no money. Given these dire circumstances, the National Assembly should attempt to ease the heavy financial burden of the public by thorough deliberation on the budget plan.