Future Response Fund to Invest in Future Growth Amid Budget Discussions

Experts are calling for institutional improvements regarding the Future Response Fund, which the government is promoting to invest an unprecedented increase in tax revenue into future growth drivers. While they agree with the intention of utilizing surplus tax revenue as a resource for future generations rather than one-time expenditures, they emphasize the need to secure the National Assembly's budget review authority, establish operational principles for the fund, and ensure the reliability of tax revenue estimates.

The Korea Development Institute (KDI) and the Economic and Social Research Institute held a discussion on the '2027 Budget and Future Response Fund' on September 11 in Seoul. The forum aimed to examine the upcoming budget and the implementation strategies for the Future Response Fund, as well as to review expected outcomes and concerns.

KDI President Kim Se-jik stated, "Fiscal policy should not only support current necessary expenditures but also expand growth opportunities for future generations and enhance the innovation capacity and long-term growth rate of the Korean economy." He expressed hope that the discussion would serve as a platform to share creative policy ideas on where and how fiscal resources should be invested to drive the 'real growth' of the economy.

The first session focused on the 'Direction of the Budget and Future Response Fund.' Jeong Hyang-woo, a social budget review officer at the Ministry of Economy and Finance, emphasized that this year's budget represents a historic turning point that innovates the fiscal management paradigm and boldly reforms outdated structures. He stated, "Bold fiscal investment will pave the way for growth, establishing a virtuous cycle of 'active fiscal policy and economic growth' that strengthens the fiscal foundation."

During the subsequent discussion, experts agreed that government savings are a suitable choice but suggested establishing governance to address concerns about infringing on the National Assembly's budget review authority.

Woo Seok-jin, a professor at Myongji University, noted, "In response to a temporary large increase in tax revenue, considering economic conditions, social reform tasks, and intergenerational issues, government savings is the best option. However, there are ongoing concerns about infringing on the National Assembly's budget review authority, discretionary fund management, and the scope of fund projects, so governance must be established to alleviate these worries."

Lee Jeong-hyuk, a professor at Hongik University, also expressed that the 2027 budget, which the current government has prepared from the budget formulation guidelines to the entire process, reflects the government's awareness of issues and solutions. He added, "It is necessary to establish clear operational principles for the Future Response Fund and strengthen mechanisms to ensure the reliability of tax revenue estimates."

The second session raised the opinion that the unprecedented increase in tax revenue should be converted into assets for future generations rather than being spent as one-time expenditures.

Lee Tae-seok, head of the KDI's Fiscal and Social Policy Research Division, stated, "Creating a fund that pools resources by policy objectives and operates over several years can reduce the risk of halting ongoing investments or making abrupt fiscal adjustments when tax revenues suddenly fluctuate. However, simply creating a fund will not automatically improve the economy's growth potential or strengthen the nation's finances."

Park Jeong-heum, a team leader at the Korea Institute of Public Finance, emphasized that for the Future Response Fund to serve its purpose of enhancing potential growth rates and stabilizing finances against revenue fluctuations, detailed legal and institutional adjustments are necessary.

Lee Sang-min, a senior researcher at the National Finance Research Institute, agreed with the fundamental intention of the Future Response Fund to utilize the increase in tax revenue from the semiconductor supercycle for future growth drivers. However, he suggested that the creation of 162.3 trillion won, management of over 100 trillion won in surplus funds, the accumulation of surplus tax revenue outside the budget, and the large-scale transfer of existing projects to the fund should be reconsidered.

The comprehensive discussion was moderated by Park Jin, a professor at the KDI School of Public Policy and Management, who led the conversation on the design challenges of the Future Response Fund and research and development (R&D) investment strategies.