KRW 7.8 Trillion 4th Supplementary Budget Formulated...Concerns Over Fiscal Soundness and National Credit (Comprehensive)

3.8 Trillion KRW for Small Businesses and SMEs, 1.4 Trillion KRW for Employment Stability Support
400 Billion KRW for Low-Income Livelihood Support, 2.2 Trillion KRW for Emergency Care and More
Total Expenditure 554.7 Trillion KRW, Up 18.1% YoY... National Debt Ratio 43.9%
Prime Minister Jeong: "Rapid Delivery to Those Most in Need... Selective Support Unavoidable"

President Moon Jae-in is presiding over the 8th Emergency Economic Meeting at the Blue House on the morning of the 10th. (Photo by Yonhap News)

[Asia Economy Reporter Kwangho Lee] The 7.8 trillion won-scale 4th supplementary budget (supplementary budget) bill to provide the 2nd customized emergency disaster relief fund in response to the resurgence of the novel coronavirus infection (COVID-19) was reviewed and approved at an extraordinary Cabinet meeting on the 10th. The government plans to submit the supplementary budget bill to the National Assembly tomorrow morning, and Prime Minister Chung Sye-kyun is expected to deliver a policy speech on the supplementary budget at the National Assembly next week.

On the morning of the same day, the government finalized the composition of the 4th supplementary budget at the 8th Emergency Economic Meeting chaired by President Moon Jae-in, and in the afternoon, held an extraordinary Cabinet meeting chaired by Prime Minister Chung to review and approve the '2020 4th supplementary budget' worth 7.8 trillion won for the payment of disaster relief funds.

◆ Customized support for COVID-19 damage targets = The 4th supplementary budget provides customized support to small business owners, employment-vulnerable groups, households in livelihood crisis, and families with childcare burdens, who are concentrated victims due to the resurgence of COVID-19. Unlike the 1st disaster relief fund (2nd supplementary budget) paid to all citizens, it helps urgently needed groups.

Specifically, 3.8 trillion won will be provided to small business owners and small and medium enterprises. To stabilize the management of small business owners affected by social distancing, the 'Small Business New Hope Fund' will be newly established to provide 3.2 trillion won (2.91 million people). In addition, 100 billion won (200,000 people) for encouraging re-challenge of closed stores, 1.03 trillion won (590,000 people) for 1st and 2nd stage financial support for small business owners, 2 trillion won (8,000 companies) for special credit loans for small and medium enterprises, and 300 billion won (2,000 companies) for emergency management stabilization fund loans will be invested.

1.4 trillion won (1.19 million people) will also be provided to respond to employment shocks caused by the prolonged COVID-19 situation. This includes 500 billion won (240,000 people) for worker employment support funds, 600 billion won (700,000 people) for the 2nd emergency employment stabilization fund, 100 billion won (200,000 people) for the youth special employment support program, 200 billion won (28,000 people) for job-seeking allowances, and 100 billion won (24,000 people) for COVID-19 overcoming jobs.

4 hundred billion won (890,000 people) will be allocated for emergency livelihood support for low-income households. A new 'emergency livelihood support' will be established for households facing livelihood crises due to the resurgence of COVID-19, providing 350 billion won (550,000 households), and 30 billion won (5,000 people) will be provided for the newly established Kiwoom jobs tomorrow.

2.2 trillion won will be invested in emergency care support. This includes 1.1 trillion won (5.32 million people) for special child care support, 60 billion won (125,000 people) for emergency support for family care leave expenses, 20 billion won (20,000 people) for indirect labor costs support for flexible work systems, 900 billion won (46.4 million people) for mobile communication fee support for all citizens aged 13 and over nationwide, and 100 billion won for contingency reserves.

◆ Full issuance of government bonds... concerns about soundness and national credit = The funds will be raised by 7.5 trillion won in government bonds and 300 billion won in small and medium enterprise promotion bonds. To ensure rapid project execution, 100% of the support will come from the national treasury without local government burden.

Accordingly, total revenue is 470.7 trillion won, the same as the 3rd supplementary budget, and total expenditure is 554.7 trillion won, an 18.1% increase compared to the previous year.

The integrated fiscal balance, which is total expenditure minus total revenue, is expected to show a deficit of 84 trillion won. The management fiscal balance, excluding various social insurances from the integrated fiscal balance, is expected to increase by 81 trillion won to 118.6 trillion won compared to the previous year (main budget 37.6 trillion won).

With the full issuance of deficit government bonds, the national debt this year will increase to 846.9 trillion won, and the national debt ratio to GDP (gross domestic product) will rise to 43.9%. If GDP contracts this year, the national debt ratio is expected to exceed 45%, which will likely pose a burden on future fiscal soundness and national credit rating management.

This 4th supplementary budget is the first in 59 years since the May 16 military coup in 1961.

Prime Minister Chung said, "We will prepare to quickly deliver the supplementary budget to those who are most in need," and added, "We will support those whose sales have plummeted or who have been restricted in business due to strengthened social distancing to get back on their feet."

He continued, "Since everyone is going through difficult times, those excluded from the support targets will likely feel disappointed and regretful," and explained, "Although we want to provide support to all citizens, considering limited resources, it was an unavoidable choice to provide thick support centered on those who suffered greater damage rather than giving small amounts to everyone."

He urged, "We once again need the generous understanding and cooperation of the people."

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