Hong Nam-gi Stands Firm Against the Giant Ruling Party... Upholds 'Regulatory' Limits

Issuance of Approximately 3 to 4 Trillion Won in Government Bonds for Nationwide Emergency Disaster Relief Payments
Deficit Bonds Expected to Increase by 42% Compared to Previous Year

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

[Asia Economy Reporter Jang Sehee] Hong Nam-ki, Deputy Prime Minister for Economy and Minister of Strategy and Finance, continues to oppose the ruling party's proposal to provide emergency disaster relief funds to all citizens. The reason for Hong's change, who was criticized by opposition lawmakers for lacking conviction and being a 'yes-man' or 'figurehead,' is due to the limits of fiscal capacity.

Even within the Democratic Party, which won a landslide victory in the April 15 general election, there is a sense of embarrassment over Hong Nam-ki's steadfast stance. Since the 'emergency disaster relief fund for all citizens' is a key election pledge of the Democratic Party, if the fiscal authorities do not change their position, the possibility of persuading the president cannot be ruled out.

On the 20th, at an expanded meeting of the Ministry of Strategy and Finance, Hong said, "The 70% eligibility criterion for emergency disaster relief funds was decided after comprehensive consideration of the need for support, effectiveness, fairness, and constraints. We will make every effort to explain and persuade during the National Assembly discussions to maintain this standard."

What Hong emphasizes most is the constraint (fiscal capacity). The premise is that additional government support may be required as the COVID-19 pandemic prolongs.

According to the Democratic Party's plan, issuing about 3 to 4 trillion won in government bonds would be inevitable if emergency disaster relief funds are provided to all citizens. Increasing this year's deficit bond issuance limit by 3 to 4 trillion won would raise deficit bonds by 42% compared to last year (101.7 trillion won). Past deficit bond issuance amounts were ▲2016: 101.1 trillion won ▲2017: 100.8 trillion won ▲2018: 97.4 trillion won ▲2019: 101.7 trillion won ▲this year's issuance limit: 140.5 trillion won.

Professor Sung Tae-yoon of Yonsei University's Department of Economics advised, "Issuing deficit bonds to implement policies with little effect can worsen fiscal soundness. Since companies are deteriorating due to COVID-19, additional funding measures should also be considered."

Voices within the Ministry of Strategy and Finance note that the Blue House and the ruling party are clearly different in this regard. The reason Hong is holding firm is President Moon Jae-in. The 70% income threshold for emergency disaster relief funds was decided at the third emergency economic meeting chaired by President Moon after consultations between the party and government, so the fiscal authorities see no reason to change their position.

Meanwhile, adjusting the deficit bond issuance limit is a matter for National Assembly discussion. In political circles, there is talk that if the Democratic Party persuades the opposition and government to increase bond issuance, the supplementary budget scale could become much larger.

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