President asks for long-term fiscal soundness

By Byun Duk-kun
SEOUL, May 26 (Yonhap) -- President Lee Myung-bak on Tuesday called for
aggressive government spending in the short term to help overcome the ongoing
economic crisis and reinforce the nation's economic growth potentials,
presidential aides said.

At the same time, however, the president told his Cabinet ministers to improve
the government's fiscal soundness by reducing its fiscal deficits in the long
term, said the aides.
"I believe it is too soon to conclude that we have now entered a recovery phase,
so we must continue to take careful measures to overcome the crisis," Lee said at
a special meeting convened to set up the country's fiscal management plans for
the next five years.
"But we must also worry about the soundness of our fiscal balance four or five
years from now," he said.
South Korea's government marked a fiscal deficit of 12.4 trillion won (US$9.8
billion) in the first quarter as the government sought to boost its spending amid
the global economic crisis. Seoul had marked a 20.7 trillion won surplus in the
first quarter of 2008.
South Korea's government debt is expected to swell to 366 trillion won at the end
of the year from 308 trillion won last year, illustrating its worsening fiscal
soundness.
The government decided to terminate some of tax incentives that "have already
achieved their goals or overlap with other incentives," Lee Dong-kwan, a
spokesman for the presidential office Cheong Wa Dae, told reporters on the
outcome of Tuesday's meeting.
The revenue loss from the tax reductions or exemptions grew from 18.3 trillion
won in 2004 to nearly 27 trillion won last year, according to the spokesman.
Other measures to help reduce the fiscal deficit will include strict and
transparent collection of taxes to increase revenue, Lee said.
"This means the government will reduce unnecessary spending while increasing its
income," the Cheong Wa Dae spokesman said.
The spokesman stressed that reducing the deficit while increasing spending will
be difficult, requiring years of careful planning and execution.
"It will be like catching two rabbits with just one stone," he said.
bdk@yna.co.kr
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