[Special Feature] The Fall of the 'Economic Emperor' Ministry of Economy and Finance and Its Future Prospects

[CEONEWS=Jaehoon Lee, Editor-in-Chief] For 18 years, South Korea’s economic bureaucrats monopolized power under the banner of the Ministry of Economy and Finance (MOEF), a vast empire controlling budget allocation, tax reform, economic policy formulation, and management of public institutions. MOEF was indisputably the "economic emperor" of the executive branch. This massive bureaucratic organization stood as the ultimate approver of nearly all government policies. It held the purse strings of other ministries, deciding the fate of their projects. It was a common saying that "if MOEF opposes it, no matter how good the policy is, it cannot pass." One former minister lamented, "Negotiations with MOEF on the budget were not negotiations but mere notifications."

■The Birth and Arrogance of the 'Economic Empire' Ministry of Economy and Finance

However, the political science maxim that "absolute power corrupts absolutely" applied equally to this economic bureaucracy. MOEF’s ‘efficiency’ degenerated into ‘bullying,’ and its ‘coordination’ morphed into ‘control.’ Though it claimed fiscal soundness as a pretext, it was criticized for suppressing other ministries’ innovation projects. Especially, the structural contradiction of simultaneously bearing the burden of economic stimulus (short-term goal) and fiscal discipline (long-term goal) undermined policy consistency. An economist likened it to "stepping on both the accelerator and the brake with the same foot." The 2008 merger of the Ministry of Finance and Economy with the Budget Office under the Lee Myung-bak administration was justified as ‘efficiency’ but has come to be seen as the most dangerous legacy in Korea’s bureaucracy.

■The Separation into Ministry of Economy and Finance and Budget Office

The government is set to undertake a major overhaul in January 2026 by splitting MOEF into two distinct entities: the Ministry of Economy and Finance (at the Deputy Prime Minister level) and the Budget Office (under the Prime Minister’s Office). This is not merely a cosmetic change but a revolutionary institutional reform aimed at dispersing economic power and restoring democratic checks and balances.

The Ministry of Economy and Finance, elevated to Deputy Prime Minister status, will oversee macroeconomic policy, taxation, financial policy, and public institution management but will no longer control budget formulation. The Budget Office, placed under the Prime Minister’s Office, will be responsible for national budget drafting, fiscal management, and mid-to-long-term strategy formulation but will lose its authority over economic policy decisions. The separation of the 'spending ministry' and the 'budget management office' is intended to restore a system of checks and balances.

The most significant change is positioning the Budget Office under the Prime Minister’s Office, signaling a strong intent to depoliticize budget formulation. A professor of public administration in Sejong City analyzed, "Placing the Budget Office under the Prime Minister’s Office aims to insulate it from the direct influence of the president and ruling party."

This reorganization goes beyond economic restructuring and encompasses financial supervision and judicial reforms. The financial supervisory system will separate the policy functions of the Financial Services Commission (FSC) from supervisory roles, assigning financial policy to the Ministry of Economy and Finance and supervision to a newly established Financial Supervisory Committee (FSC). Simultaneously, a Financial Consumer Protection Agency (FCPA) will be created to strengthen consumer protection.

Prosecutorial power will also be decentralized by abolishing the current prosecution office, splitting indictment authority to the Public Prosecution Office and investigative power to the Serious Crime Investigation Office. This symbolizes the dismantling of concentrated economic and judicial power and the return to a democratic control system. In other words, the MOEF’s dismantling is not just an administrative reform but a 'national reset project' to reshape the entire power structure.

■The Power Vacuum and Policy Coordination Black Hole

Despite high expectations, CEONEWS focuses on the risk of a ‘power vacuum black hole’ resulting from this reform.

Previously, the Minister of Economy and Finance (Deputy Prime Minister) acted as the executive’s economic commander-in-chief, mediating conflicts between ministries. Post-split, there is a risk that the coordination function between the two entities will weaken. Conflicts between economic policy and budget policy are inevitable, and without a control tower to resolve these cracks, policy confusion is unavoidable.

Consider this scenario: the Ministry of Economy and Finance pushes for a large-scale tax cut to stimulate the economy, while the Budget Office opposes it citing fiscal discipline. What once was resolved internally within MOEF could now escalate into open inter-ministerial conflict. Who will mediate? The Prime Minister? The President’s Office? Without clear authority and accountability, policies may drift.

Ultimately, this gap could shift to the President’s Office and the Prime Minister’s Office. The risk is that if presidential aides control both budget and economic policies, the problem of unelected power consolidation may resurface. A political commentator in Yeouido warned, "MOEF’s dismantling could actually strengthen the presidential office’s control over the economy."

The U.S. Office of Management and Budget (OMB), which operates under the president, has been criticized for undermining bureaucratic independence, and Japan’s Ministry of Finance and Ministry of Economy, Trade, and Industry conflict weakened policy efficiency. These serve as warnings. More important than dismantling MOEF is designing coordination mechanisms to prevent ‘power dispersion’ from devolving into ‘policy fragmentation.’ Transparent coordination systems and legal consultative bodies must be established in tandem.

■Is ‘Top-Down Budgeting’ Another Form of Centralization?

Alongside this reform, the government announced the introduction of a ‘top-down budget allocation’ method. While ostensibly aimed at increasing ministry autonomy and achieving efficient fiscal management, in practice, it could broaden presidential involvement in budget decisions.

Top-down budgeting involves the government first setting total expenditure limits, distributing these to ministries, and ministries then drafting detailed budgets within their limits. In theory, this strengthens fiscal discipline and encourages creativity. In reality, however, whoever controls the total budget ceiling wields real power.

If the President’s Office exercises this authority, the Budget Office risks becoming a mere ‘technical budget agency,’ undermining its independence and reviving long-standing political budget allocation problems.

An official from the National Assembly Budget Office commented, "For top-down budgeting to work properly, the Budget Office must have guaranteed independence from political interference. Merely placing it under the Prime Minister’s Office is insufficient." Without autonomy, this reform will be a ‘formal split,’ not true decentralization.

■Lessons from the Failures of the U.S., Japan, and the U.K.

The U.S. concentrates budget functions in the presidential OMB, reinforcing executive control but aggravating partisan budget biases. Changes in administration often bring sudden shifts in budget philosophies, undermining long-term fiscal planning.

Japan’s separate Ministry of Finance and Ministry of Economy, Trade, and Industry led to bureaucratic turf wars and regulatory overlap, weakening economic policy consistency. During the 'Lost Decade,' the Ministry of Finance clung to fiscal discipline while the Ministry of Economy pushed for stimulus, resulting in policy paralysis and prolonged recession.

The U.K.’s Treasury strong central control distorted long-term growth policies. Its austerity measures in the 2010s reduced public investment, causing infrastructure decay and productivity stagnation.

These cases teach a single lesson: "Splitting organizations does not automatically ensure checks and balances. Without institutionalized cooperation, separation is meaningless." One economic expert emphasized, "Power decentralization is only the beginning of institutional design; actual operation depends on culture and norms."

■‘The Fall of the Emperor’ or ‘The Dawn of Chaos’?

The dismantling of the Ministry of Economy and Finance is not just the disappearance of a ministry; it is a 21st-century reform experiment that redraws Korea’s administrative power map. The separation into the Ministry of Economy and Finance and the Budget Office symbolizes an attempt to break the vicious cycle of power concentration and restore the principle of checks and balances.

However, the success of this separation depends not on the system but on its operation. Only when the two ministries foster a culture of cooperative checks rather than mutual distrust and competition will the reform succeed.

Specifically, three conditions are essential:

First, legal consultative bodies must be established. Regular coordination meetings between the Ministry of Economy and Finance and the Budget Office must be legislated, with clear mechanisms for resolving disputes.

Second, the Budget Office’s independence must be guaranteed, including secure terms for its chief and protections from political interference.

Third, the National Assembly’s budget review function must be strengthened. Dispersing executive power alone is insufficient; effective legislative oversight must accompany it.

Without these, the reform risks repeating the administrative inefficiency and power struggles of the past 18 years. Vigilant public and media oversight is imperative.

Though the 'economic emperor' MOEF will vanish, the ‘DNA of power concentration’ that nurtured it still lives in many parts of the executive branch.

True reform is not dismantling ministries but redesigning the DNA of power.

CEONEWS warns: "Power only truly belongs to the people when it is divided."

Whether this reform ends as the ‘fall of the emperor’ or the ‘dawn of chaos’ depends on how faithfully the spirit of checks and balances is realized.

The 'dismantling of the super ministry' is not an end but a beginning.

A new administrative experiment in Korea has just begun.

History will watch the outcome, and we must be witnesses and participants in this historic moment.