The government announced on the 1st that it will establish a “Future Response Fund” worth 162.3 trillion Korean won, utilizing additional tax revenue from the semiconductor boom to invest in youth, artificial intelligence (AI), and other sectors. The plan aims to allocate the large-scale tax revenue not to single-year consumptive spending but to productive expenditures such as new industries and regional revitalization, while also serving as a stabilizing mechanism to bolster fiscal capacity in case of tax shortfalls.
◇162 trillion Korean won mega fund.. investments in youth, AI, and more
According to the budget proposal for next year, most of the Future Response Fund’s revenue will come from additional tax revenue generated by the semiconductor boom. This year’s national tax revenue is projected to reach 415.4 trillion Korean won, 25.2 trillion Korean won higher than the government’s initial forecast of 390.2 trillion Korean won. Next year’s national tax revenue is expected to be 584.4 trillion Korean won, 172.3 trillion Korean won higher than the government’s estimate from a year ago. The government decided to allocate 162.3 trillion Korean won of this surplus to the Future Response Fund, considering the actual tax revenue trends. Additionally, excess tax revenue (tax revenue re-estimated in September each year), remaining surplus funds, and profits from bond and stock investments will also be added to the fund.
The Future Response Fund will include four project accounts (Youth Account, Growth Engine Account, Regional Account, and Education and Talent Account) to carry out sector-specific initiatives, along with one comprehensive account to pool surplus funds and bolster fiscal capacity when needed. Approximately 45.4 trillion Korean won, or about a quarter of the total fund, will be allocated to the four project accounts. In the youth sector, projects such as first-time employment support for young people, youth future savings programs, and a three-part package supporting marriage, childbirth, and childcare will be implemented. Through the Growth Engine Account, frontier-level AI development, the “AI for All” project, and the construction of autonomous driving test cities will be supported. The Regional Account will provide integrated support funds for Jeonnam-Gwangju and assist in building local hotels, while the Education and Talent Account will fund full scholarships for local national universities and support startup-focused universities.
Additionally, 12.5 trillion Korean won from the Future Response Fund will be used to reduce new government bond issuance next year, with the remaining surplus funds managed as “104.4 trillion Korean won plus alpha (+α).” The “plus alpha” refers to the possibility of adding excess tax revenue to the fund. If domestic tax revenue increases due to higher income and corporate taxes in the September re-estimation of this year’s tax revenue, the increase will be added as “plus alpha.”
◇Around 104 trillion Korean won in surplus funds to bolster fiscal capacity
The government plans to use surplus funds to strengthen fiscal capacity without needing supplementary budget revisions in case of tax shortfalls. According to the proposed amendment to the National Finance Act, transfers from the Future Response Fund to the general account to cover revenue shortfalls are not subject to specific amount restrictions and can be adjusted within the fund itself. If unexpected fiscal expenditures arise during the year, a supplementary budget must be compiled, which takes time due to parliamentary review and execution processes. The government aims to respond swiftly to changing conditions using the Future Response Fund. Even if a tax shortfall occurs, the fund’s resources can be transferred to the general account without waiting for parliamentary review of supplementary tax adjustments, ensuring stable national budget execution.
The government plans to soon select a professional investment management institution to handle the surplus funds. Details on the management method and target returns will be announced later. Regarding the possibility of using the Future Response Fund to repay government bonds, a source from the Planning and Budget Office stated, “It is a possible option depending on future fiscal and economic conditions.”
◇Controversy over “30% discretionary power” in the future fund
However, concerns have arisen that the fund could be used as the government’s “slush fund.” While annual operational plans for government funds are typically reviewed by the National Assembly, 20–30% of major expenditure items (20% for project-based funds and 30% for financial funds) can be adjusted without parliamentary approval. According to the proposed National Finance Act amendment, up to 30% of the Future Response Fund’s major expenditure items can be changed without parliamentary re-review. Cho Yong-beom, vice minister of planning and budget, explained, “The Future Response Fund has characteristics of both project-based and financial funds, but since the surplus fund account constitutes a large portion, it is closer to a financial fund, hence the 30% threshold.” Theoretically, the project fund of about 45 trillion Korean won could be expanded, but since the 30% adjustment applies to individual program units, the Planning and Budget Office stated that it is unrealistic to increase the total amount by 13–14 trillion Korean won.
Critics question whether the Future Response Fund’s purpose aligns with the specific objectives outlined in the National Finance Act, as existing funds like the Foreign Exchange Stabilization Fund and the Housing and Urban Fund are designated for clear purposes such as stabilizing the foreign exchange market and supporting housing for low- and middle-income groups. The fund’s stated focus areas—youth, growth engines, regions, and future talent—are seen as broad concepts that could encompass nearly all national tasks except public safety and defense.
The government dismissed concerns about discretionary power, emphasizing “strengthened post-hoc parliamentary oversight.” Cho explained, “Generally, if a fund’s operational plan is changed during the year, the change only needs to be reported by the month following the quarter in which the change occurred. However, the Future Response Fund must be reported to the National Assembly immediately upon any change, as stipulated in the Future Response Fund Act.” While immediate reporting allows opposition parties to raise issues promptly, the government still retains the authority to autonomously adjust up to 30% of major expenditures without parliamentary approval.
