Presidential Office Says Future Response Fund Isn’t a Slush Fund, to Target Youth and Regions

Semiconductor Boom to Drive Massive Tax Revenue

Government to Draw Up Three- to Four-Year Spending Plan

South Korea’s presidential office said the proposed Future Response Fund is not intended to be a permanent vehicle, pushing back against criticism that it could become a government slush fund.

The office said it plans to organize projects on a three- to four-year timeline and use the fund to deliver results within that period.

The presidential office on August 26 stepped up its explanation of the fund’s purpose and rationale in two separate briefings. In the morning, Park Sung-hoon, head of the Future Response Fund promotion task force at the Office of Planning and Budget, appeared on the presidential office’s YouTube channel. In the afternoon, a presidential official met reporters at the Chunchugwan press center.

The government plans to use a large tax windfall from the semiconductor boom to create the fund and invest in four priority areas: youth, growth drivers, regional development, and education and talent. With next year’s tax revenue forecast to exceed 500 trillion won ($361.3 billion), the fund could amount to 200 trillion won ($144.5 billion).

About 20% to 30% of the fund’s main expenditures can be adjusted without approval from the National Assembly. That has prompted criticism that the government may try to use the Future Response Fund like a slush fund. Increases to the main budget and supplementary budgets, by contrast, are subject to parliamentary control.

A presidential official said setting up the fund as a separate account does not mean the government can use it for anything. The money will be directed to areas the government wants to prioritize within a limited period.

The intent is to use the fund for temporary and narrowly defined projects that are difficult to finance through the general account. The official cited purchases of graphics processing units, or GPUs, as an example, saying existing budget allocations may not cover them when unit prices rise sharply. In that case, the government could respond more efficiently by revising the fund’s operating plan and making the purchase.

Addressing calls to use the money to repay government debt, the official said the government redeemed part of its government bonds through a supplementary budget and plans to do so again next year. It also plans to issue fewer government bonds next year, which the official said could effectively amount to repayment.

The presidential office also reaffirmed its commitment to expansionary fiscal policy even as strong semiconductor exports and rising corporate earnings are set to sharply increase market liquidity. Liquidity management is the job of the monetary authorities, the official said, and fiscal authorities should focus on their own role.

The official called it a rare opportunity to reverse the economy’s slowing growth trend and said the government cannot afford to stand by. The government is planning next year’s total expenditure at more than 800 trillion won, with the increase from this year running in the double digits.

Han Jae-young, Korea Economic Daily reporter jyhan@hankyung.com