South Korea has decided to cut the discretionary spending of government agencies by 10 percent next year in a bid to focus its fiscal policy on job creation, the finance ministry said Tuesday.

The 2017 budget guidelines, which passed the Cabinet on Tuesday, call for a thorough examination of spending earmarked for public works projects and welfare outlays.

Out of the nearly 380 trillion won ($326.2 billion) of the state budget last year, some 53 percent, or 200 trillion won, is discretionary spending set by the parliamentary legislation on a yearly basis that helps the government pursue fiscal policy.

The finance ministry said the saved budget will be used to create jobs for young people and enhance the country's growth potential in the long term.

It will give incentives to ministries that successfully manage to slash their discretionary spending as required.

"It doesn't mean that we call for a 10 percent cut in discretionary spending unconditionally. We want them to reduce unnecessary spending in public works projects that they can handle," said Ahn Do-geol, the director general of the welfare budget bureau in the finance ministry.

"The 2017 budget guidelines are aimed at encouraging ministries to improve their spending in a more efficient way."

The ministry said it will also streamline all government-funded welfare projects and remove redundant programs in order to increase efficiency in state budget spending.

All projects worth 10 billion won or more will be subject to the ministry-led feasibility review in advance, the ministry added.

The latest guidelines will be sent to the government ministries and agencies by Thursday, with each responsible for submitting their 2017 budget spending plan by May 31.

The finance ministry will then examine all plans and submit its 2017 budget proposal to the National Assembly on Sept. 2. (Yonhap)