[Q&A] Hong Nam-ki "7 Trillion Won Emergency Disaster Relief Fund Supplementary Budget... No Revenue Adjustment"

Supplementary Budget, Full Effort on Expenditure Restructuring... Deficit Bonds Issuance Inevitable
"Considering Limiting Usage Period for Local Love Gift Certificates and Electronic Currency"

[Image source=Yonhap News]

[Asia Economy Reporter Jang Sehee] Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance, announced on the 30th regarding the emergency disaster relief payment, "The government will implement a 'one-point supplementary budget' of approximately 7.1 trillion KRW to provide emergency disaster relief payments of up to 1 million KRW to 14 million households in the bottom 70% income bracket."

At a briefing on the results of the 3rd Emergency Economic Meeting held at the Government Seoul Office, Deputy Prime Minister Hong stated, "The government plans to secure these funds primarily through expenditure restructuring to the greatest extent possible," adding, "Revenue adjustments will not be included." He further noted, "If there is a shortfall, partial issuance of deficit bonds may be unavoidable."

The following is a Q&A with Deputy Prime Minister Hong.

▲ What are the effects of the emergency disaster relief payments on consumption stimulation and growth rate support?

= I believe there will definitely be a consumption stimulation effect. Rather than cash, we will provide consumption coupons, electronic money, and local gift certificates to ensure that the support funds are quickly converted into consumption. Since funds amounting to about 10 trillion KRW will be provided, it is expected to have a certain effect in driving the growth rate. However, I will not quantify this in percentage terms at this time.

▲ Will revenue adjustments be included in this supplementary budget? How much deficit bonds will be issued?

= The total size of the measures is a little over 9 trillion KRW, with the supplementary budget expected to be around 7.1 trillion KRW. The government plans to cover most of the 7.1 trillion KRW through restructuring this year's expenditure budget. If there is a shortfall, partial issuance of deficit bonds may be unavoidable. However, the government’s intention is to achieve this primarily through restructuring. This supplementary budget is a one-point supplementary budget and will not include revenue adjustments.

▲ What are the guidelines for local governments that have already announced their disaster relief directions?

= Regarding the sharing of disaster relief funds, the government has decided to bear 80%, and local governments 20%. However, in the case of Seoul City, a slightly different reduction rate may apply compared to other local governments. Local governments may add their own funds to the government’s emergency disaster relief payments to provide support at different scales. I think local governments will respond with considerable flexibility.

▲ Is this a one-time support?

= The emergency disaster relief payment is a one-time support. Regarding health insurance and industrial accident insurance funds, support will be provided in a form where the funds and the central government budget share the burden. Later, considering the financial status of these funds, additional support for the funds may be reviewed during the 2021 budget formulation.

▲ When will the actual disaster relief payments be made?

= The supplementary budget must pass the National Assembly to finalize the funds and expenditure projects, so it is difficult to predict the timing. I earnestly request the National Assembly to approve it promptly.

▲ Why is the payment method limited to local love gift certificates and electronic money?

= From the perspective of stimulating consumption, providing local love gift certificates or electronic money, which can be directly used for consumption in the local area, is much more effective than cash. Limiting the period during which these can be used helps induce concentrated consumption, so we plan to further consider this area.

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