Gov't plans cash aid for 35.8 mil. people to cushion oil price shock

A sign informs customers that they can use the state-issued consumption vouchers at a shop in a traditional market in western Seoul's Mapo District, Tuesday, when the government approved a 26.2 trillion won supplementary budget that includes cash handouts of up to 600,000 won for the bottom 70 percent of income earners. Like last year’s cash-equivalent consumption vouchers, recipients can choose to receive the cash via credit card, debit card or local currency, encouraging spending rather than saving. Yonhap

The Lee Jae Myung administration plans to distribute cash assistance ranging from 100,000 won ($65) to 600,000 won per person to about 35.8 million people, covering the bottom 70 percent of income earners, in a bid to help offset the strain from elevated oil prices linked to the Middle East conflict, according to the budget ministry Tuesday.

The measure, which will require 4.8 trillion won, is part of a 26.2 trillion won supplementary budget plan aimed at cushioning households and businesses from rising energy and logistics costs as the conflict persists.

The government’s move reflects an urgent fiscal response as surging global oil prices raise concerns that the Korean economy could face a “triple shock” of high inflation, elevated interest rates and weakening currency.

The extra budget plan focuses on easing high oil price pressures as well as supporting vulnerable households, limiting industrial fallout and stabilizing supply chains.

Approved at a Cabinet meeting, the bill was submitted to the National Assembly for passage the same day, and the ruling Democratic Party of Korea and the main opposition People Power Party (PPP) agreed to pass it by April 10.

The largest share of the budget — 10.1 trillion won — will be allocated to easing the burden of high oil prices on households.

With this allocation, the government will support the rollout of a fuel price cap while providing 100,000 won per person in fuel price relief payments to those in the bottom 70 percent income bracket, with additional support of up to 500,000 won depending on income level and region.

Support for vulnerable groups will also be expanded. About 200,000 low-income households receiving energy vouchers and using kerosene or liquefied petroleum gas will receive an additional 50,000 won. In addition, 65 billion won will be allocated for fuel-linked subsidies to help reduce production costs for farmers and fishermen and ease the burden on small-scale cargo vessel operators.

A total of 2.8 trillion won will be set aside to support people's livelihoods, including 800 billion won dedicated to easing hardships among vulnerable groups affected by the Middle East conflict.

To mitigate the impact on small businesses and the labor market, the government will inject an additional 300 billion won in policy financing, employment retention subsidies and loans aimed at paying overdue wages.

As part of youth-focused measures, a new initiative will provide up to 100 million won in startup funding, alongside the launch of a tailored job training program in partnership with large corporations, dubbed the “K-New Deal Academy.”

A combined 2.6 trillion won will be deployed to minimize industrial damage and stabilize supply chains.

The export voucher program, designed to ease logistics bottlenecks for exporters, will be doubled to cover 14,000 firms. In addition, the government will provide 7.1 trillion won in export policy financing and 300 billion won in low-interest funding for the tourism sector.

The government will also increase policy financing for Korean content and the cultural sector, while allocating more than 30 billion won in additional livelihood support to help independent artists sustain their creative activities.

To prepare for prolonged high oil prices, currency volatility and potential disruptions in naphtha supply, the government will reinforce a 5 trillion won contingency reserve.

Budget Minister Park Hong-keun, center, explains details of the supplementary budget during a pre-briefing at Government Complex Seoul, Friday. Courtesy of Ministry of Planning and Budget

Budget Minister Park Hong-keun said the supplementary budget will be financed by 25.2 trillion won in additional tax revenue generated from a semiconductor upcycle and a strong stock market, along with 1 trillion won from internal funds.

“This avoids the need for additional government bond issuance,” Park said Friday in a pre-briefing, seeking to dispel concerns raised by the PPP that the large-scale supplementary budget could increase the burden on people’s livelihoods.

“I urge the National Assembly to approve the bill swiftly so that households and businesses can benefit from the package without delay,” he said.

The floor leaders of the rival parties, announcing their agreement to pass the bill by April 10, said the Assembly’s extraordinary session for April will start on Friday.

A budget speech is set for Thursday, followed by questioning and deliberations by the special parliamentary budget committee on April 7 and 8.