Budget Reform and Fiscal Sustainability: Experience of South Korea

South Korea has begun fiscal budget reforms and reforms of financial system since 2003, which has established a five-year rolling National Financial Management Plan (NFMP) system through a large-scale reform. It is a drastic reform that is led by the executive branch, supported by the president, and assisted by international organizations and integrates annual budgets, medium-term plans, performance budgets, and citizen participation through top-down budgetary mechanisms and has been institutionalized in the form of organizational restructuring and law revision. Although there existed a couple of issues such as limited decentralization, insufficient constraints, and slow local implementation during the reform process, the budgetary system reforms of South Korea confirmed its effectiveness in responding to economic crisis, adjusting resource allocation and promoting fiscal stability. The purpose of this paper is to summarize the experience of South Korea’s fiscal governance and discuss the significance of its experience on China’s fiscal sustainability. And introduces Korea’s fiscal budget reforms in detail This paper attempts to provide useful In addition, this can lead to experience for China’s budget reforms in future from describing the reform process of South Korea’s budget system, evaluating the successful experience and the risks of potential vulnerabilities associated with the financial system.