Ministry of Planning and Budget to focus spending on mega-projects, landmarks while overhauling education grants, basic pension

The Ministry of Planning and Budget is set to undertake a sweeping expenditure restructuring that includes reforms to the local education finance grant system and the basic pension.

The ministry plans to press ahead with its "2045 National Development Strategy" — timed to the centennial of Korea's liberation — while establishing a future response fund and channeling fiscal resources into three mega-projects in semiconductors, physical AI and AI data centers, as well as large-scale landmark projects, to build new growth engines.

Minister of Planning and Budget Park Hong-keun presented the plans Wednesday at a joint ministerial briefing held at Cheong Wa Dae's state guesthouse.

The briefing was the first presidential policy report since the ministry's launch and laid out a vision for linking national future strategy with fiscal management to address structural crises and secure new growth drivers.

The ministry will continue work on the 2045 National Development Strategy, a medium-to-long-term blueprint setting out Korea's future vision and national goals for 2045, the centennial of liberation. The plan will be tied to the national fiscal management plan, sector-specific master plans and annual budget proposals to strengthen implementation. Public input will be gathered, and researchers in their 30s and 40s will be brought in to reflect the perspective of younger generations. The ministry will also draw up "10 Core Tasks for a Great Transformation of Korea," covering structural reform in labor, education and pension.

"National future strategy and fiscal management have not been closely linked — they have been fragmented," Park said. "We will follow the compass that the medium-to-long-term strategy points to and use active fiscal policy to open the path." He added that future strategy would be translated into actionable policy and investment, while fiscal management would be conducted with a medium-to-long-term horizon.

Structural reform to secure fiscal soundness will proceed in parallel. All fiscal programs will be reviewed from scratch, with discretionary spending cut by 15 percent and mandatory spending by 10 percent. Small and medium-sized enterprise support programs across all ministries, energy transition initiatives, agricultural policy funds and Official Development Assistance will be restructured and made more efficient.

The ministry will also pursue institutional reforms covering major mandatory expenditures, including the local education finance grant, the basic pension, the employment insurance fund and national health insurance finances. On the education grant reform, the ministry plans to continue consultations with the Ministry of Education following a recent public forum, reach common ground as soon as possible and decide whether to reflect the outcome in next year's budget proposal. Alongside this, the ministry will strengthen performance-based fiscal management by upgrading its integrated fiscal program evaluation system and overhauling its performance management framework.

Key policy tasks will also be pushed forward at pace. Fiscal resources will be concentrated on five structural challenges: the AI transformation, reducing polarization, region-led growth, responding to demographic change and overcoming the climate crisis. The ministry will develop a fiscal investment strategy for large-scale physical AI demonstration projects in manufacturing, care and defense, and will expand employment-linked fiscal support for the AI transition as well as lifetime asset-building support.

For regional development, the ministry will pursue expanded growth engines and improved living conditions by region under the "5 poles, 3 special zones" framework, along with broader block grants and the creation of a supra-regional account. In the demographic sphere, the ministry plans to advance marriage- and birth-friendly policies and inclusive immigration policy. On climate, it will push for expanded renewable energy and the development of a Korean-style voluntary carbon market, along with the introduction of a market stabilization regime known as K-MSR.

Fiscal investment will focus on expanding growth potential and spreading the fruits of growth across generations, regions and social strata. The government will concentrate spending on three mega-projects — semiconductors, physical AI and AI data centers — as well as high-performance AI model development, manufacturing tacit knowledge transfer, full-stack AI factory construction, and the cultivation of post-semiconductor industries including biotech, future mobility, nuclear power, shipbuilding and K-defense.

Alongside this, the ministry plans to work with related ministries to identify landmark projects centered on comprehensive youth support, expanded renewable energy deployment, core technology research and development, regional growth engine support, a project to build 10 universities on par with Seoul National University, and community integrated care — with the aim of reflecting these in next year's budget proposal.

Additional tax revenues expected from the semiconductor boom and other sources will be set aside in a future response fund and invested in youth, growth drivers, regional development and talent cultivation. The timing of the fund's establishment and the related legislative schedule will be decided through consultations with related ministries.

"We stand at a decisive moment — in the midst of a civilizational transformation represented by AI, while also facing structural crises such as demographic change and polarization," Park said. "We will lead the way in designing a new future for Korea and building a country where all citizens can be happy, backed by a solid fiscal foundation."

The ministry highlighted its key first-half achievements under three themes: speed, paradigm shift and normalization. It cited as a leading example the compilation and passage of a 26.2 trillion won ($17.6 billion) supplementary budget in response to the Middle East war — completed in just 29 days, the fastest in the past 20 years — along with the execution of 85 percent of the rapid-disbursement budget within three months.

The ministry also said it had introduced an integrated fiscal program evaluation system for the first time, designating 36.2 percent of evaluated programs for budget cuts or consolidation — more than double the five-year average of 15.8 percent and the largest expenditure restructuring on record. A full overhaul of the public participatory budgeting system, stronger regional preferential treatment in preliminary feasibility studies and measures to root out fraudulent subsidy claims were also cited as major achievements.