South Korea to Tap Up to 16 Trillion Won in State Funds Amid Tax Revenue Decline

SEOUL: South Korea's government announced plans to utilize up to 16 trillion won of state funds in response to a substantial tax revenue shortfall, as the country grapples with the effects of an economic slowdown and weak corporate activities. The finance ministry revealed this strategy on Monday, indicating a move away from issuing additional government bonds. According to Yonhap News Agency, the Ministry of Economy and Finance projects that tax collections will reach 337.7 trillion won in 2024, marking an 8.1 percent decrease from earlier forecasts made during the 2024 budget planning. This decline, primarily attributed to sluggish corporate performance, represents a shortfall of 29.6 trillion won from initial projections. The revised estimate is also 6.4 trillion won less than last year's tax revenue, which saw a record deficit of 56.4 trillion won. In response to the anticipated shortfall, the ministry plans to leverage various public funds, including up to 6 trillion won from foreign exchange equalizat ion funds and 4 trillion won from public capital management funds. An additional 3 trillion won will be drawn from funds allocated for housing and urban management. The strategy also includes deferring 6.5 trillion won in payments to local governments and reducing local subsidies by 9.7 trillion won. The ministry emphasized its commitment to maintaining financial sustainability by avoiding the issuance of new government bonds. It also highlighted the potential for an unused budget of 7 to 9 trillion won this year, which could be redirected to essential projects. The government aims to prioritize infrastructure initiatives and support programs to mitigate the impact of reduced tax revenue on the economy.