Government to Create 162 Trillion-Won Future Response Fund Amid Semiconductor Boom

South Korea plans to set aside 162.3 trillion won next year in a new fund built from tax revenue generated by the semiconductor boom. The government says the money will support future growth while preventing a temporary revenue surge from driving an unsustainable spending increase.

The Future Response Fund will target four areas: youth, growth engines, regional development, and education and talent. The government plans to spend 45.4 trillion won through those accounts, including 3.8 trillion won for a marriage, childbirth and childcare package, 4.7 trillion won for frontier artificial intelligence development, 3.5 trillion won in regional growth support, and 200 billion won in full scholarships for students at regional national universities.

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The Future Response Fund is a strategic investment platform for using large-scale tax revenue for productive spending.

Another 12.5 trillion won will go toward reducing new government bond issuance. The money will be transferred to the Public Capital Management Fund, which will cut new bond sales by the same amount. Deputy Finance Minister Cho Yong-beom said next year’s new issuance would fall below this year’s 107 trillion won, while warning that sharply reducing issuance could undermine the government bond market.

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The volume of new government bonds issued next year will be smaller than this year’s 107 trillion won.

The remaining 104.4 trillion won will stay in reserve for use if tax revenue later declines. The government expects national tax revenue to rise 49.8% next year from this year’s initial budget, but projects growth of only about 3% from 2028. Officials argue that spending the full windfall immediately would push spending growth above 27% and create pressure on future budgets.

That approach has drawn criticism over oversight. The government plans to permit changes of up to 30% in major spending categories without parliamentary approval, compared with 20% for other project funds. People’s Solidarity for Participatory Democracy called for stricter conditions and procedures, while Pai Chai University professor Kim Hyun-dong said the fund’s size and broad objectives could conflict with the legal requirement that funds serve a specific purpose.

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When tax revenue rises sharply during a boom, spending should temporarily expand, and when revenue weakens during a downturn, fiscal tightening should not lead to a recession.