The government plans to establish a 'Future Response Fund' worth 162.3 trillion won for the upcoming year. This fund aims to invest in youth, local areas, growth drivers, education, and talent development by setting aside additional tax revenue from the booming semiconductor market. It is designed to allow for flexible responses to changes in fiscal conditions, such as tax revenue shortfalls. However, there are concerns that the government’s discretion in managing over 100 trillion won in surplus funds could become excessive without prior approval from the National Assembly.
On September 1, the government approved the '2027 Budget Proposal' during a State Council meeting chaired by President Lee Jae-myung.
Park Hong-keun, Minister of Economy and Finance, stated, "The Future Response Fund serves as a strategic investment platform to utilize large tax revenues for productive spending and enhance the efficiency of fiscal management."
The fund's size has been confirmed at 162.3 trillion won, with the government explaining that it has accumulated additional tax revenue exceeding the trend of domestic tax over the past decade. There are no set minimum accumulation levels or duration for the fund. It will be managed considering the semiconductor market and business expenditure, with provisions allowing for changes of up to 30% in key items without prior approval from the National Assembly.
A Ministry of Economy and Finance official explained, "The Future Response Fund encompasses both project and financial fund characteristics, but given the large proportion of surplus funds, we applied the 30% standard for financial funds."
Of the total, 45.4 trillion won will be directly invested in projects, while 104.4 trillion won will be held as surplus funds. An additional 12.5 trillion won will be allocated from the Future Response Fund to the general account and the public fund management fund to reduce new government bond issuance.
Next year’s projects will focus on four key areas: youth, growth drivers, local areas, and education and talent development. Comprehensive support will be provided across various stages of growth, from job creation and entrepreneurship to housing, assets, marriage, and childbirth. Investments will also be made to elevate South Korea to a global leader in artificial intelligence (AI), support equity investment-type research and development (R&D), and foster new industries beyond semiconductors.
The largest account among the four will be the local account, which will be established at 15.3 trillion won. Projects include the Local Future Growth Support Fund (3.5 trillion won), the National Living Convenience Complex Center (1.5 trillion won), and agricultural AI transformation demonstrations (200 billion won).
The growth driver account, totaling 14.2 trillion won, will fund the development of frontier-level AI (4.7 trillion won) and the Everyone's AI initiative (250 billion won). Other projects in this account include the establishment of autonomous driving demonstration cities (800 billion won) and supply chain stabilization (200 billion won).
Additionally, the youth account and the education and talent account will receive 13.3 trillion won and 10.1 trillion won, respectively. The government plans to enhance lifecycle support through initiatives such as a marriage, childbirth, and childcare package (3.8 trillion won), universal public rental housing (1.4 trillion won), and future talent growth funds (700 billion won).
Next year, the surplus funds are expected to amount to approximately 104.4 trillion won. A Ministry of Economy and Finance official noted, "If domestic tax revenue increases due to the September revenue reassessment, we will add the increase from 2026 to the fund. If deemed necessary from a policy perspective, we can respond flexibly through fund adjustments without needing a supplementary budget."
The government also announced plans to address tax revenue shortfalls using the fund. However, there are ongoing concerns that relying solely on the fund to respond to significant tax revenue drops could increase government discretion without discussions with the National Assembly.
In response, the Ministry of Economy and Finance asserted that the Future Response Fund has a higher capacity to respond than the general account. Deputy Minister Cho Yong-beom explained, "When a tax revenue shortfall occurs, it must be addressed through revenue adjustments, which requires going back to the National Assembly. We will ensure stable fiscal management by quickly reinforcing finances within the scope defined by the Future Response Law."
* This article has been translated by AI.
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