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| Prime Minister Kim Boo-kyum, right, speaks during an extraordinary Cabinet meeting at the Government Complex in Seoul, Jan. 21, to endorse a supplementary budget plan aimed at helping small businesses hit by the COVID-19 pandemic. Next to him is Finance Minister Hong Nam-ki. Yonhap |
The government proposed an additional extra budget of 14 trillion won ($11.8 billion) Friday to support small merchants hit hard by the COVID-19 pandemic amid extended virus curbs.
This year's first extra budget will be financed with a bond sale of 11.3 trillion won, according to the finance ministry, and marks the seventh round of supplementary spending aimed at coping with the fallout of the pandemic.
The government plans to submit the extra budget proposal to the National Assembly for approval Monday.
The ruling Democratic Party of Korea ramped up the call for another extra budget to aid affected merchants despite criticism that it was vote-buying with cash handouts ahead of the March presidential election.
The size of the extra budget could increase during an Assembly review as the ruling and main opposition parties voiced the need for larger support.
Of the proposed budget, 11.5 trillion won will be set aside to support merchants and small businesses hit by the extended antivirus measures caused by the protracted pandemic.
The government plans to spend 9.6 trillion won to additionally provide 3 million won each to 3.2 million merchants in a bid to ease the burden of paying rent and other costs. The amount was raised from the 1 million won in similar support given in December.
The administration will also use 1.9 trillion won to shore up the state program to compensate merchants for their losses caused by state orders to shut down or suspend their businesses due to COVID-19. The move will raise the related budget to 5.1 trillion won from the current 3.2 trillion won.
To contain the upsurge in virus cases, the health authorities imposed tighter antivirus measures, including a four-person cap on private gatherings and a 9 p.m. business hour curfew on cafes and restaurants, from Dec. 18 through Sunday.
The government partially eased virus curbs Monday by raising the private gathering limit to six while keeping the curfew until Feb. 6. The number of virus cases stayed in the 6,000s after it soared to nearly 8,000 in late December.
Of the extra budget, the administration plans to spend 1.5 trillion won to increase the number of hospital beds for critically ill virus patients and buy COVID-19 treatment pills and shots. The remaining 1 trillion won will be set aside as reserve funds to brace for quarantine demand amid the spread of the Omicron variant.
The extra budget proposal comes as the country logged an additional excess in tax revenue in 2021 amid rises in asset prices and the economic recovery.
The government is estimated to have posted an additional 10 trillion won in excess tax revenue last year on top of the previously created 50.6 trillion won in such surpluses.
The proposed supplementary budget will be first financed with the debt sale as the excess tax revenue can only be used after the government settles last year's state accounts in April.
Finance Minister Hong Nam-ki earlier opposed drawing up an extra budget in January, saying the government's priority is to implement a record high national budget of 607.7 trillion won for 2022.
With the extra budget, the national debt is forecast to reach 1,075.7 trillion won this year, up from the previous estimate of 1,064.4 trillion won, according to the ministry. The sovereign debt will exceed the 1,000 trillion-won mark for the first time this year.
The debt-to-GDP ratio is also expected to rise to a record high of 50.1 percent from 50 percent. The fiscal deficit is forecast to reach 68.1 trillion won this year.
Korea has enough room to carry out an expansionary fiscal policy, but economic policymakers sounded the alarm over the pace of growth of the debt.
Political uncertainty in an election year will also add risks to the implementation of the economic policy.
The successor to President Moon Jae-in may want to draw up another extra budget to carry out their election pledges after the March 9 election.
Korea drew up two supplementary budgets totaling 50 trillion won last year to provide tailored support to small merchants and cash handouts to people in the bottom 88 percent income bracket.
In 2020, the country drew up four extra budgets totaling around 67 trillion won to cope with the COVID-19 pandemic. In May that year, the government doled out 14.3 trillion won in stimulus checks to all households. (Yonhap)
