By Lee Hyo-sik
Staff Reporter
The government has decided to spend an additional 30 trillion won on top of this year's 283 trillion won budget to stimulate the troubled economy.
A planned supplementary budget, equivalent to about three percent of Korea's gross domestic product (GDP), is aimed at creating jobs, as well as financially helping low-income households and small businesses hit by the ongoing global economic downturn.
But critics argue that the extra budget could worsen fiscal soundness, as the government expects lower tax revenues this year and a slump in business activities. They also raise doubts about the effectiveness of the additional spending in generating jobs and boosting domestic demand.
According to government sources Sunday, the Ministry of Strategy and Finance has completed a supplementary budget draft and will consult with the governing Grand National Party (GNP) this week. The finance ministry plans to submit the budget bill to the National Assembly in April for approval.
The GNP is asking the ministry to brand the extra budget as a comprehensive scheme designed to create jobs in an apparent attempt to improve its standing with the public amid worsening labor market conditions.
``We asked the government to place greater weight on three things. We want the supplementary budget to be spent to produce more jobs, stimulate domestic demand and accelerate the corporate restructuring,'' GNP chief policymaker Yim Tae-hee told reporters Sunday.
The government had initially considered drawing up a ``big'' supplementary budget of up to 50 trillion won. The Samsung Economic Research Institute (SERI) recently called for a bold supplementary budget of 51 trillion won to stimulate the economy effectively, saying the unprecedented extra funds were necessary.
But it decided to keep the additional spending under 30 trillion won, as there may be a need to draw up a second extra budget in the second half, with growing concerns over deteriorating state coffers. The government drew up a 4.6 trillion won budget surplus in September last year.
The envisioned extra spending is expected to focus on creating many jobs for the middle and low-income classes. The government also plans to fund a ``public work program'' aimed at employing jobless middle-aged and elderly people in a range of public services sectors, as well as other job generating schemes.
Out of the planned supplementary budget, low-income earners will receive shopping coupons as part of government efforts to help them tide over economic hardship and boost domestic consumption.
The government also plans to make up for the projected tax revenue shortfalls while extending more credits to small- and medium-sized exporters struggling with plunging demand overseas.
The unregistered self-employed, including street vendors, will be allowed to borrow up to five million won at five to six percent annual interest rates from the Korea Credit Guarantee Fund.
Part of the supplementary budget will also be spent on a range of infrastructure development projects.
However, opposition parties and civic groups raised concerns that the planned extra spending will undermine the nation's fiscal soundness, with the government having to issue state bonds to raise the necessary funds. Last year, Korea's state debt nearly tripled to 317.1 trillion won from 111.4 trillion won in 2000, or 32.7 percent of GDP, up from 19.2 percent in 2000.
Additionally, the intensifying conflicts between the governing and opposition parties over the passage of media reform and other controversial bills will likely make it more difficult for the supplementary budget bill to be passed by the Assembly on time.