Self-employed people are slipping deeper into debt, as they have been ordered to close or limit their business operations under state-imposed social distancing guidelines aimed at containing the spread of the COVID-19 pandemic. As things stand, their economic plight is unlikely to be alleviated anytime soon.
According to a report released by the Bank of Korea, the outstanding debt of 2.38 million self-employed persons amounted to about 803.5 trillion won ($718.8 billion) at the end of last year, up 118.6 trillion won from a year ago. The increase is nearly double the previous year's rise of 60.6 trillion won, meaning that 44 percent of the nation's 5.42 million self-employed people have an average debt of 337 million won. The self-employed who took out loans for the first time last year borrowed nearly 125.8 trillion won. And nearly 200,000 individuals are heavy debtors who have borrowed money from at least three different financial firms to keep their business operating.
The government has doled out emergency relief funds four times to help ease the financial distress of the broader populace, caused by the pandemic. The ongoing fourth round program of relief funds envisions granting 1 million won to 5 million won to 3.85 million small business owners. These grants are very helpful, but certainly fall far short of compensating them for their losses to date. As the pandemic is expected to drag on, stopgap measures are no longer tenable.
Many people agree that there must be appropriate compensation for the self-employed who have been suffering huge losses from the government-imposed business restrictions amid the persistent coronavirus. Both the ruling and opposition parties have already agreed, in principle, to push for a relief bill aimed at making up for their business losses incurred by the COVID-19 restrictions. However, they failed to approve the bill last month, as the Ministry of Economy and Finance opposed it, citing the country's fiscal burden. The compensation issue is long overdue, so the parties should speed up the legislation, though applying it retroactively must be dealt with cautiously.