S. Korea to Deploy Up to 16 Trillion Won from State Funds Amid Tax Revenue Shortfall

SEOUL: South Korea's government announced plans to utilize foreign exchange equalization funds and other financial resources while reducing local subsidies to address a significant tax revenue shortfall projected for this year. The finance ministry disclosed these measures on Monday, citing an expected decrease in tax collection. According to Yonhap News Agency, the Ministry of Economy and Finance anticipates collecting 337.7 trillion won (US$253.41 billion) in taxes for 2024. This figure represents an 8.1 percent decline, or 29.6 trillion won less than initial forecasts made during the 2024 budget planning process, primarily due to weak corporate activities amid last year's economic slowdown. The revised tax revenue projection also falls short by 6.4 trillion won compared to the previous year's tax collection of 344.1 trillion won, a year marked by a record shortfall of 56.4 trillion won. Despite this, the government intends to avoid issuing additional government bonds, opting instead to leverage state res ources to preserve financial sustainability. The ministry's strategy includes deploying up to 16 trillion won from public funds, comprising 4 trillion won from public capital management funds, a maximum of 6 trillion won from foreign exchange equalization funds, and approximately 3 trillion won from housing and urban management funds. Furthermore, the government plans to defer the payment of 6.5 trillion won to local governments and reduce 9.7 trillion won in subsidies in response to declining tax revenues. Unused budgetary funds are also expected to contribute between 7 to 9 trillion won this year, according to the ministry. During a parliamentary audit session, Choi emphasized the importance of using available state financial resources to minimize potential side effects. He warned against increasing debt, which could burden future generations and negatively impact the country's sovereign credit rating.