Government cuts 69 trillion won in mandatory spending and redirects funds to core priorities

South Korea’s government plans to cut 69 trillion won in mandatory spending in its 2027 budget proposal, exceeding its target of reducing such spending by 10 percent. It also plans to redirect savings toward core government priorities.

The restructuring changes how local education grants are calculated. After 55 years, the system that automatically allocated 20.79 percent of domestic tax revenue will be revised to reflect nominal economic growth and changes in the school-age population.

The government plans to place 32.5 trillion won in additional tax revenue above the trend of the past decade into a future-response fund for reinvestment in talent development. It will also set aside 30.5 trillion won in additional local allocation tax revenue for the same fund.

Changes to unemployment benefits, including excluding unpaid holidays from payment calculations, are expected to save 1.4 trillion won. Discretionary spending will fall by 38.6 trillion won, the largest reduction on record, after more than 2,100 programs, or over 10 percent of all projects, are eliminated.

The cuts include 3.8 trillion won from consolidating agricultural and fisheries policy loans and changing support for renewable-energy loans. Research and development adjustments linked to technology trends will reduce spending by 6.2 trillion won, while restructuring low-performing overseas development aid programs will save 900 billion won. Online promotion and fewer events will cut operating costs by another 100 billion won.