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(EDITORIAL from The Korea Herald on July 26)

All News 07:14 July 26, 2016

Extra budget
Focus should be on creating jobs

The National Assembly is set to begin deliberations on the government's 11 trillion-won (US$9.64 billion) supplementary budget bill.

The extra budget is part of the government's 28 trillion-won fiscal spending package aimed at propping up the faltering economy and easing the fallout from the ongoing restructuring of ailing industries, including shipbuilding.

The government hopes that the parliament passes the bill by Aug. 12 so that it can begin spending the funds before September.

Yet the deliberation process could be extended as opposition parties are critical about the government's allocation of funds.

The Finance Ministry said that of the 11 trillion won, 1.2 trillion won would be used to pay off the national debt. It said the planned repayment would lower the ratio of the government debt to gross domestic product from the current 40.1 percent to 39.3 percent.

Yet using part of the extra budget to repay national debt makes little sense, given that the budget is intended to stimulate the economy and create jobs.

The ministry seems to have forgotten why the extra budget has been created in the first place. What matters now is not fiscal soundness. As growth momentum has weakened, the government should provide a big fiscal stimulus to the economy, even if it means an increase in the national debt.

Fortunately, the supplementary budget will not boost the national debt as it will be fully financed with surplus tax revenue. Hence the ministry should devote the entire extra budget to stimulating the economy.

Furthermore, the government can repay state bonds with excess tax revenue without creating an extra budget as such repayment is treated as an exception to the revenue and expenditure under the National Finance Act.

The debt repayment plan is an attempt to address criticism that national debt has increased sharply under the incumbent administration.

It also suggests that the ministry has pushed for the additional budget without a clear, well-thought spending plan.

The ministry said the supplementary budget would create 68,000 new jobs and raise the economy's growth rate by 0.2-0.3 percentage point.

Lawmakers need to examine the government's job creation plan as the number of jobs to be created appears to have been exaggerated.

They should ensure that taxpayers' money is used to create decent jobs and revitalize the economy.

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