Planning Ministry Launches Restructuring of Discretionary and Mandatory Spending, Mobilizes Finances for Three Mega Projects [Business Report]

Briefing at the Blue House on the 15th

Additional Tax Revenue from Semiconductor Boom Directed to Future Investments

Advancing the “10 Core National Remodeling Agenda Items” for Korea

The government will push for an intensive fiscal restructuring in the second half of this year, reducing discretionary spending by 15% and mandatory spending by 10%. The resources secured through this and additional tax revenues driven by the semiconductor boom will be concentrated as investments in three major mega projects: Physical Artificial Intelligence (AI), AI data centers, and the advanced semiconductor industry. In addition, with an eye on the 100th anniversary of Liberation in 2045, the government plans to formulate a medium- to long-term national development strategy to focus national capabilities on addressing structural challenges, including AI and the climate crisis.

On the 15th, the Ministry of Planning and Budget announced these core action plans for the second half of the year during a departmental briefing at the Blue House State Reception Hall presided over by President Jae Myung Lee. Hongkeun Park, Minister of Planning and Coordination, said, "We will design Korea's new future and support it with robust finances," adding, "We will establish a national strategy for the medium and long term and lead a national transformation by strategic allocation of resources and demand-oriented fiscal management."

15% Cut in Discretionary Spending, 10% in Mandatory Spending… Concentrated Investment in Three Mega Projects

The Ministry will review all fiscal projects from scratch and carry out an intensive restructuring, decisively abolishing or reducing low-performing and inefficient projects. First, discretionary spending will be cut by approximately 15%, eliminating unnecessary and redundant projects. Support programs for small and medium-sized enterprises, policy finance, and various funds will also be subject to restructuring. Mandatory expenditures, such as local education grants and basic pensions, will be reduced by about 10% through institutional reforms.

The resources secured through this restructuring, along with additional tax revenue from the semiconductor industry’s prosperity, will be concentrated on securing future growth engines. The government has selected semiconductors, physical AI, and AI data centers as the "three mega projects," and will expand nationally coordinated strategic investments for these, while also pursuing large-scale landmark projects such as comprehensive youth support and energy transformation.

Additional tax revenue will be separately accumulated to establish a "Future Response Fund." This fund will serve as resources to invest in the younger generation, future growth engines, local areas, and talent development. Furthermore, starting with the 2027 budget proposal, the government will expand the principle of preference for local governments by increasing comprehensive block grants, establishing a super-regional account, and reflecting financial incentives for administrative integration.

Minister of Planning Hongkeun Park is speaking at the ministry work briefing presided over by President Jaemyung Lee on the 15th at the Blue House State Guest House. Photo by Yonhap News Agency White House Press Photographers Group

Formulation of the "2045 National Development Strategy"… Implementing Structural Reforms in AI and the Climate Crisis

The Ministry will prepare the "Korea 2045 National Development Strategy," aiming for completion by 2045, the 100th anniversary of Liberation. Centered on the "2045 Strategy Formulation Committee," which was launched last May, the government will widely reflect the opinions of youth and the general public to design a future vision and strengthen execution by linking it to the National Fiscal Management Plan and annual budgets.

The government will focus policy on five major structural challenges: the AI transformation, alleviating polarization, responding to local extinction, coping with demographic change, and overcoming the climate crisis. In addition, the "10 Core National Remodeling Agenda Items," which include labor, education, and pension reforms, will be presented in stages.

The fiscal management approach will also shift to performance-based methods. The government will further advance its Integrated Fiscal Project Evaluation, and establish a new basic plan for performance management so that evaluation outcomes are directly reflected in actual budget allocation. Through investment-driven research and development (R&D), profit-sharing in the content industry, and contributions from strategic export partnerships, the government will build a system where returns on government investments are recycled back into the national budget.

A "people-sovereign fiscal system" will also be instituted, wherein the public, National Assembly, and government ministries actively participate in fiscal management. Opinions from the National Assembly and political parties will be incorporated institutionally into the budget formulation process, and a fiscal information platform "Finance for All," integrating central, local, and education fiscal data with an AI-friendly interface, will be established to make financial information public. The execution and management of budgets will be reformed, moving from simple fund disbursement to a system that tracks and manages the actual amounts delivered to final beneficiaries. Additionally, customized fiscal support plans will be prepared to comprehensively support key life-stage groups—including youth, seniors, and people with disabilities—in terms of jobs, housing, and asset accumulation.

This content was produced with the assistance of AI translation services.