Future Response Fund to be designed with 'greater precision and transparency,' vice minister says

Jo Yong-beom, Vice Minister of the Ministry of Planning and Budget, said Thursday that the Future Response Fund is designed "to invest in and prepare for the future, going beyond the limits of a single-year budget," adding that the government will develop it "with greater precision and transparency, as it is an innovative system being introduced for the first time."

Jo made the remarks in a congratulatory address at the Future Response Fund Policy Symposium, held that day at the Korea Federation of Banks building in Seoul.

Jo said next year's national tax revenue is projected to reach around 584 trillion won ($441 billion), nearly 50 percent more than this year, and that nominal GDP grew 26.4 percent in the second quarter of this year — the highest growth rate in 47 years.

"This is the result of a bold shift toward an active fiscal policy," he said. "Fiscal policy primed the pump of economic growth, which in turn increased tax revenue, and that revenue has now become the capacity to invest in the future."

He said, however, that South Korea must prepare for tax revenue volatility given the economy's heavy reliance on the semiconductor industry. "In practice, we experienced a large surplus and then a massive shortfall in tax revenue in back-to-back years not long ago," Jo said. "In an economy as dependent on the semiconductor industry as ours, this kind of tax revenue volatility is a challenge we will have to keep managing going forward."

The Future Response Fund is designed to operate as both a strategic investment platform and a fiscal stabilization mechanism — hedging against tax revenue volatility while channeling resources into future growth.

Large-scale additional tax revenues will be concentrated in four key areas central to raising the potential growth rate: youth, growth engines, regional development, and education and talent. The fund will also perform a fiscal stabilization function by rapidly reinforcing fiscal capacity with accumulated reserves and repaying government bonds.

"The government will fulfill its responsibilities to the end so that this becomes a Future Response Fund for everyone — built together by regions and the central government, the National Assembly and the executive, and current and future generations," Jo said.

The symposium focused on the fund's specific operating principles and ways to strengthen its institutional framework.

Kim Hyun-a, head of the fiscal research division at the Korea Institute of Public Finance, delivered the keynote address, emphasizing the need for strategic investment and fiscal stabilization in the AI era through the fund. She also proposed that the fund serve as a safety net for people's livelihoods as a catalyst for growth, and outlined measures to ensure long-term fiscal sustainability.

Kim Jeong-hun, president of the Institute for Fiscal Policy Research, said the fund could help overcome the volatility inherent in single-year budgets and secure medium-term stability and predictability in both central and local government finances. Kim Bong-hwan, a Seoul National University professor, recommended that the fund strike a balance between fiscal democracy and flexibility in budget management — maintaining agility to respond quickly to a rapidly changing environment while strengthening National Assembly oversight.

Kim Nam-jong, head of the capital markets research division at the Korea Institute of Finance, stressed the importance of raising the potential growth rate and making timely AI investments. He called for the establishment of clear asset management principles, asset allocation centered on liquidity by maturity, and an independent risk management and performance evaluation framework.

The Ministry of Planning and Budget said it will review the recommendations raised by experts and academics at the symposium, incorporate necessary improvements into the fund's operational framework, and work closely with the National Assembly to ensure legislation related to the Future Response Fund passes before the end of the year.