May 18, 2022
SEOUL – The National Assembly has started reviewing the 59.4 trillion won ($46.5 billion) supplementary budget proposal from the Yoon Suk-yeol administration, with ruling and main opposition parties clashing over how much of the budget should be used to assist pandemic-hit small-business owners as promised.
The debate between the ruling People Power Party and the main opposition Democratic Party of Korea comes down to whether the 9 trillion won proposed to pay back treasury bonds should be approved as it is or instead allocated to increase support for small-business owners.
The National Assembly’s Special Committee on Budget & Accounts on Wednesday is starting a comprehensive three-day hearing session to reach a decision on how much of the proposed budget will be spent on what. Other relevant parliamentary committees are also slated to carry out reviews on the budget proposal throughout this week.
Although both major parties are on the same page that the supplementary budget must earn final approval from the parliament within this month, the road to consensus is expected to be anything but easy, as they have not even agreed on how much the aggregate amount of the extra budget should be.
The Yoon administration proposed a total of 59.4 trillion won — composed of 36.4 trillion won in spending and 23 trillion won in grants — to regional governments based on the expected increase in tax income from this year. The proposal does not require any debt sale, the Finance Ministry said.
In his first speech to the National Assembly as president on Monday, Yoon emphasized “bipartisan cooperation” in requesting lawmakers to pass the supplementary budget bill as soon as possible to stabilize people’s livelihoods.
“What the government took into consideration in composing the supplementary budget was to fully compensate for the losses of small-business owners while maintaining macroeconomic stability such as interest rates and inflation,” Yoon said during the speech.
Yet the Democratic Party has asked that the proposed extra budget be enlarged by 10.8 trillion won so that compensation to small-business owners for social distancing rules-induced losses are increased and vulnerable populations are provided with better support measures.
The liberal party is asking the budget proposal to be modified so that the 9 trillion won allocated to pay back the treasury bond is instead used to upgrade support measures for the pandemic-hit population.
Pandemic-hit Koreans should be supported with enough funds to spend on utilities and telecommunications on top of personnel fees and monthly rent, the party argues, adding that more businesses in different industries should be supported through the supplementary budget.
Using the 9 trillion won set for state debt repayment for additional support measures will free the country from the burden of issuing more bonds to make up for the extra budget, the party argues.
The Democratic Party is also pushing for a much larger extra budget. Having recently suffered a loss of public support, it looks to stop the Yoon administration and the People Power Party from taking full credit for the proposal.
The party has been hit with a recent series of sexual misconduct scandals, and is at a disadvantage ahead of the local elections on June 1, given the tendency for voters to favorably view the party that won the presidential election in March.
The People Power Party yet remains firm on the need to secure the 9 trillion won to pay back national debt, claiming it is important to have the debt to GDP ratio fall back to below 50 percent.
The relentless use of extra budget during the Moon Jae-in administration caused the ratio to quickly rise and exceed 50 percent as of now, which has to be promptly addressed, it claims.