Budget carefully

Obligatory expenditures to increase more than 100tr won for four years

Obligatory expenditures, which are government spending required by laws, are expected to increase by more than 100 trillion won (US$72 billion) for four years.

According to the government finance management plan for the 2025-2029 period, unveiled by the Ministry of Economy and Finance on Friday, mandatory spending will swell by 100.9 trillion won from 364.8 trillion won this year to 465.7 trillion won in 2029.

The growth in obligatory expenditures is largely due to an increase in subsidies provided under various entitlement programs.

Currently, the government hands out 100,000 won in allowance for every child under the age of 8, regardless of the income level of their parents. The eligible age for the allowance is set to rise by one year annually to under the age of 13 in 2030. The child allowance budget is projected to expand from 1.95 trillion won this year to 2.48 trillion won next year, and to 3.12 trillion won in 2030. The budget on average increases 10.2 percent each year.

Basic pensions currently provided to senior citizens aged 65 and older who are in the bottom 70 percent of income are predicted to grow by 1.54 trillion won (7.1 percent) this year to 23.36 trillion won next year. The number of basic pensioners is expected to rise from 7.36 million to 7.79 million. The amount of the basic pension will be raised from 342,510 won to 349,360 won.

Medical expenses and living subsides for low-income individuals and households will grow 13.3 percent and 8.9 percent, respectively, to 9.84 trillion won and 9.17 trillion won next year.

An allowance to be provided from next year to every resident in some agricultural and fishing villages will also contribute to the increase in obligatory expenditures.

The government will launch a two-year pilot project next year to pay 150,000 won a month to each of 240,000 residents in six sparsely populated rural villages. These communities are in danger of extinction due to an aging population and the outward migration of young people. This project is scheduled to expand to 2.72 million residents in 69 villages from 2028. Five years of the related budget is estimated to total 6.2 trillion won.

The 1.15 trillion won local business voucher program was reflected in next year's government budget as a new obligatory expenditure item. The program became obligatory on Aug. 4 when the National Assembly passed a bill that makes it mandatory for the central government to support the local voucher programs of local governments.

Increases in obligatory expenditures are accelerating. Their annual average growth rate for the 2025-2029 period is 6.3 percent, which is far above 4.6 percent for discretionary spending and 5.5 percent for overall government expenditures.

It is also 0.6 percentage point higher than the 5.7 percent estimated in the government finance management plan for the 2024-2028 period, drawn up last year. At the current speed of growth, obligatory expenditures will near 500 trillion won in 2030.

It is understandable that by increasing obligatory expenditures, the government means to prevent the extinction of rural villages and raise the birth rate nationally. But increasing them more than 6 percent each year seems too swift. Particularly, doing so at a time with seldom-growing tax revenues and fears of economic recession cannot but leave behind aftermath. Furthermore, interest on national debt is set to climb from 30.1 trillion won this year to 44 trillion won in 2029.

The government must restructure spending if it intends to keep an expansionary fiscal policy. There are still many budgets carried over and accumulated. Due to a decreasing school-age population, about 8 trillion won remains unused each year from the central government's education subsidy to local governments. Yet, related law that requires automatic allocation of 20.79 percent of internal revenue as an education subsidy remains unrevised.

It is hard to reduce budgets, especially obligatory expenditures, once they are adopted or increased. The government should be prudent in increasing them.

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