[Exclusive] Government Plans to Distribute Emergency Disaster Relief Funds as 3-Month Vouchers

Ministry of Health and Welfare TF Reviews Income Bottom 70% Benchmark Based on Household Trend Data
Households Eligible for Benefits as of March Likely to Qualify

Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance, is briefing on the results of the 1st Emergency Economic Meeting at the Government Seoul Office in Jongno-gu, Seoul on the 19th. Photo by Hyunmin Kim kimhyun81@

[Asia Economy Reporters Kim Hyunjung and Jang Sehee] The government will provide emergency disaster relief funds in the form of vouchers with a three-month usage period in response to the COVID-19 crisis. This is to quickly inject the funds into the market and stimulate consumption in the short term. However, the income criteria for eligibility have not yet been determined, and the related second supplementary budget bill must pass through the National Assembly, making it likely that actual disbursement will be delayed until May.

According to the Ministry of Economy and Finance on the 31st, the government has decided to distribute 9.1 trillion won in emergency disaster relief funds as regional vouchers and local currency with a three-month usage period. A government official explained, "Considering the scope and effectiveness of support comprehensively, we judged that setting a usage period of about three months is appropriate."

◆ Settling on three-month regional vouchers and electronic money... Income criteria expected to take time = The government's decision to provide short-term vouchers, which is unprecedented, reflects the judgment that the consumer market has been severely contracted. However, due to the launch of local currency and administrative issues, the usage period may be slightly adjusted in some local governments.

The issue lies in the criteria for "who will receive" the funds. The day before, the government only announced the broad framework of "providing 1 million won to 14 million households in the bottom 70% income bracket, based on a four-person household," and currently, the Ministry of Health and Welfare is organizing a task force team to review the criteria mainly using household trend data. Considering the Ministry of Health and Welfare's low-income coupon system, which is a similar model, it is expected that the emergency disaster relief funds will also be given to households eligible as of March.

The income threshold remains unclear. The government has never before used the concept of the bottom 70% income bracket. Naturally, there is no readily available database (DB) to apply immediately. Regarding this, Deputy Minister Koo Yoon-chul of the Ministry of Economy and Finance explained on a radio program that "the bottom 70% income roughly corresponds to 150% of the median income, which is about 7.1 million won per month for a four-person household."

Whether to include those with substantial assets but low income as recipients is also a key issue. Technically, it is possible to distinguish by using the "recognized income amount," which converts assets and financial holdings into income alongside earned income, business income, and daily income. However, it is more likely that only income will be considered for now. Deputy Minister Koo also said, "If there is enough time, assets, financial income, and automobile tax (car value) can be included, but the emergency nature of the support means it is difficult to apply a complex calculation system." This implies that a complicated assessment system is not feasible for immediate disbursement.

Professor Sung Tae-yoon of Yonsei University's Department of Economics commented on the confusion, saying, "The problem arose because the government expanded the scope up to the middle class and had to decide how far to recognize eligibility," adding, "Since government funds are involved, meticulous design is important." He further pointed out, "Providing cash support only to the bottom 20% income bracket would have had a greater economic effect."

◆ How to secure funding... Entering 512.3 trillion won budget restructuring = The government's goal is to cover the 7.1 trillion won needed for the emergency disaster relief funds as much as possible within this year's main budget of 512.3 trillion won. Considering the deterioration of fiscal soundness, the government chose budget restructuring over issuing deficit bonds. Both President Moon Jae-in and Deputy Prime Minister Hong Nam-ki mentioned "painful restructuring." These remarks reflect awareness of criticism that the government is ignoring fiscal issues and pursuing a "handout policy" ahead of next month's general election.

In particular, due to factors such as interest rate cuts and oil price declines, some expenditures are expected to decrease compared to the originally planned budget, and the government plans to utilize these savings. Deputy Prime Minister Hong said on KBS 9 o'clock News the day before, "Interest payments will decrease as interest rates fall, and there will be budget savings related to oil prices as they have halved," adding, "We will use budget items that can be mobilized without damaging their original purpose among investment projects stalled due to the COVID-19 crisis."

Additionally, the government has stated it will not introduce further tax cuts. This is based on the judgment that large-scale blanket tax cuts could have adverse effects amid a situation where tax revenues may decline due to COVID-19. Deputy Prime Minister Hong said, "Through the first supplementary budget, we took measures to reduce corporate tax, income tax, and VAT for small business owners," adding, "Large-scale tax cuts are controversial in terms of effectiveness and also affect tax revenues, so we are not considering them separately." He further stated, "We will implement tailored tax relief measures so that those in need receive tax reductions."

This content was produced with the assistance of AI translation services.