With a view to sounder  fiscal management, the government has submitted to the National Assembly the FY 2016 Budget Bill, which targets less efficient fiscal projects for major restructuring and also includes several other policy initiatives that will tighten the reins on government expenditures for fiscal soundness, as well as the National Fiscal Management Plan for 2015-2019, which presents the objectives and directions for medium-term fiscal management.
This report provides an analysis of the overall fiscal performance, fiscal stance, fiscal distribution by areas, and government debt presented in the FY 2016 Budget Bill and suggests policy tasks for securing fiscal soundness in the medium- to long-term.
  
  The FY 2016 Budget Bill is characterized by cautiously conservative forecasts for economic growth and tax revenues in contrast to the optimistic outlook of the past. Despite measures to suppress growth in total spending (at 3.0 percent in 2016) at the lowest level since 2010 to ensure that the slowing rise in total revenues (2.4 percent) does not result in further deterioration of the fiscal balance, however,  government debt will nevertheless exceed 40 percent of gross domestic product (GDP) for the first time ever.

  In the medium-  to long-term, while the current level of government debt is not one that would severely undermine the country’s economic viability, more proactive management over fiscal soundness may be needed. The rise in government debt is mainly attributable to a rising primary deficit. Moreover, welfare spending will continue to grow in order to deal with the rapidly aging population, and there could be other uncertainties in the country and abroad, such as possible reunification of the country, that could trigger sudden changes in fiscal conditions. Thus, in the area of institutional improvement, this report calls for stronger fiscal discipline, beginning with the introduction of robust fiscal rules applicable to the country’s fiscal conditions. It also suggests the need for strict restructuring of non-essential or not-urgent fiscal projects to enhance effectiveness of fiscal policy, as well as the need for multi-faceted strategies to secure more revenues to fund rising expenditures in a stable manner.