South Korea Unveils Record Budget Amid Fierce Debate

South Korea is at a political and economic crossroads as President Lee Jae Myung’s administration pushes forward with a record-breaking 728 trillion won ($525 billion) national budget for 2026, sparking heated debate in parliament and across the country. The budget, announced on November 5, 2025, marks the largest in the nation’s history and includes a bold 10.1 trillion won allocation for artificial intelligence (AI) development—more than triple the prior year’s figure—as well as significant boosts to research and development, disaster recovery, and welfare programs.

President Lee, fresh from the diplomatic success of the Asia-Pacific Economic Cooperation (APEC) summit in Gyeongju, called on lawmakers for bipartisan cooperation to pass the budget by December 2. In his address, he likened his AI-focused vision to the transformative industrialization of former President Park Chung-hee and the digital modernization under President Kim Dae-jung, declaring, “It is Korea's first budget to open the era of AI.” According to The Korea Times, Lee emphasized that the new budget aims not only to propel South Korea into the ranks of global AI powerhouses but also to protect the socially vulnerable, strengthen self-defense, and revitalize the nation’s economy.

The numbers are striking: the research and development budget has risen nearly 20 percent to 35.3 trillion won. Meanwhile, Nvidia has pledged to supply 260,000 graphics processing units to the government and four major conglomerates, a move widely seen as a vote of confidence in Korea’s sovereign AI ambitions. This surge in investment comes at a time when the world is watching closely for signs of an “AI bubble,” but, as Lee and his supporters argue, the risks are justified by the potential for technological leadership and economic growth.

Yet, the road to passing this budget has been anything but smooth. The main opposition People Power Party (PPP) boycotted the president’s address in protest of a special prosecution’s move to seek a detention warrant for their former floor leader, Choo Kyung-ho, over an alleged December 3 martial law declaration. PPP chief Rep. Jang Dong-hyeok didn’t mince words, describing the situation as “war” and alleging political oppression. Some PPP legislators even resorted to heckling as Lee entered the National Assembly, a scene reminiscent of previous partisan standoffs—such as when the ruling Democratic Party of Korea (DPK), then in opposition, boycotted former President Yoon Suk Yeol’s own budget address amid investigations into Lee himself.

Amid this political theater, the DPK and government have pressed ahead. On the same day as Lee’s announcement, they convened at the National Assembly to discuss further increasing the budget, particularly in the wake of a fire at the National Intelligence Service in Daejeon. The government has set aside about 158.4 billion won to upgrade aging equipment and prevent future disasters, and agreed to unify disaster recovery system budgets under the Ministry of Public Administration and Security, while boosting funds for information protection infrastructure.

President Lee’s pledge to support the economic revitalization of social solidarity has also translated into increased funding for welfare programs and community support. DPK chairman Chung Chung-rae underscored the urgency of passing the budget on time, stating, “As 2026 is the first year that the Lee Jae-myung government operates the country with its own budget, the Democratic Party of Korea will make sure to deal with next year's government budget within the legal deadline.” Kim Byung-ki, the party’s floor leader, described the budget as “a blueprint for opening the future and a promise to protect the lives of the people.”

But if the ruling party views the budget as a historic opportunity, the opposition sees it as a fiscal minefield. The PPP has labeled the proposal a “debt party budget” and accused the administration of “fiscal spray populism.” Song Eon-seok, the PPP’s floor leader, pointed to a 2.4 percent consumer price growth rate in October—the highest in 15 months—as evidence that the government’s 14 trillion won consumption coupon and the planned issuance of 24 trillion won in local love gift certificates for 2026 are fueling inflation. “(The Lee Jae-myung government) does not present a fundamental solution that can promote price stability, but is concentrating on investing in fiscal populist budgets,” Song said, according to Maeil Business Newspaper.

At a public hearing of the Special Committee on Budget and Accounts, experts offered sharply divergent views. Kim Dae-jong, a professor of business administration at Sejong University, warned that the budget’s 8.7% year-on-year increase is “far above 2% inflation,” cautioning, “Excessive fiscal expansion can put a serious burden on national creditworthiness and price stability. We need to stop the budget expansion policy, which focuses on welfare expansion, and return to the national survival strategy of ‘sound finance and stable currency’.”

Yet, not all analysts agree. Woo Seok-jin, a professor of economic statistics at Myongji University, countered that expansionary finance is “an inevitable option to solve the problems of the Korean economy, such as a decline in potential growth rate, a sluggish economy and deepening polarization.” Cho Yong-chul, a professor of economics and finance at Hanshin University, further argued that the 3.5% growth rate of total expenditure for next year’s budget is actually smaller than this year’s supplementary budget growth rate of 3.9% and the total income growth rate of 5%, making it “difficult to be seen as an expansionary budget.”

Beyond the economic debate, the looming question is how to pay for it all. To fund the 728 trillion won budget, the government may need to issue additional state bonds, potentially pushing the national debt ratio above 50 percent of GDP. With local elections approaching, concerns about pork-barreling and fiscal discipline have only intensified. Both parties are under pressure to demonstrate cooperation and compromise, but the temptation to secure local projects and curry favor with voters is strong.

The stakes are high—not just for the Lee administration, but for the country’s economic future and political stability. Supporters argue that now is the time to capitalize on Korea’s growing international prestige, especially after the successful APEC summit, to leap ahead in AI and technology. Critics warn that unchecked spending could undermine financial stability and fuel inflation, especially as the global economic outlook remains uncertain.

As the National Assembly begins its detailed review, the outcome will depend on whether lawmakers can rise above partisan squabbles and focus on the national interest. The coming weeks will test not only the government’s ability to deliver on its ambitious promises, but also the resilience of Korea’s democratic institutions and economic management. The nation waits to see whether this “super budget” will mark the dawn of a new era—or become a cautionary tale about the perils of fiscal overreach.