Seoul: Obligatory expenditures in South Korea, which are mandated by law, are projected to rise by more than 100 trillion won over the next four years.

According to Yonhap News Agency, the Ministry of Economy and Finance released the government finance management plan for 2025-2029, indicating that mandatory spending will escalate from 364.8 trillion won this year to 465.7 trillion won in 2029, marking an increase of 100.9 trillion won.

The surge in obligatory expenditures is primarily attributed to the expansion of subsidies under various entitlement programs. Notably, the government currently provides an allowance of 100,000 won for every child under the age of 8, irrespective of parental income levels. This eligibility age will incrementally increase to under 13 years by 2030. Consequently, the child allowance budget is expected to grow from 1.95 trillion won this year to 2.48 trillion won next year, eventually reaching 3.12 trillion won in 2030, with an average annual increase of 10.2 percent.

Additionally, basic pensions for senior citizens aged 65 and above, who fall within the bottom 70 percent income bracket, are predicted to rise from 1.54 trillion won this year to 23.36 trillion won next year. The number of beneficiaries is set to increase from 7.36 million to 7.79 million, with the pension amount increasing from 342,510 won to 349,360 won.

Medical expenses and living subsidies for low-income groups will also see significant growth, rising by 13.3 percent and 8.9 percent, respectively, to 9.84 trillion won and 9.17 trillion won next year. Moreover, a pilot project commencing next year will provide a monthly allowance of 150,000 won to each of 240,000 residents in six rural villages facing population decline. This project aims to expand to include 2.72 million residents across 69 villages by 2028, with a five-year budget totaling 6.2 trillion won.

The local business voucher program, costing 1.15 trillion won, has been incorporated into next year's budget as a new obligatory expenditure following the National Assembly's approval of a bill mandating central government support for local voucher programs.

The growth rate of obligatory expenditures, averaging 6.3 percent annually for the 2025-2029 period, outpaces the projected growth rates for discretionary spending and overall government expenditures, which stand at 4.6 percent and 5.5 percent, respectively. This rate is also higher than the 5.7 percent estimated for the 2024-2028 period.

While the government aims to address demographic challenges and support rural communities through increased spending, the rapid rise in obligatory expenditures, amidst stagnant tax revenues and potential economic downturns, raises concerns. Interest on national debt is also expected to climb from 30.1 trillion won this year to 44 trillion won in 2029.

To maintain an expansionary fiscal policy, the government is urged to restructure spending and address unused budgets, such as the 8 trillion won annually from the education subsidy due to a declining school-age population. Prudence is advised in increasing obligatory expenditures to avoid long-term financial repercussions.