Disaster Relief Funds and Institutionalizing Loss Compensation... What Will Happen to the Nation's Treasury?

Government: "Must comprehensively consider form, funding, and feasibility"
Deficit bonds worth 91.9 trillion won planned for issuance this year

Prices for traditional holiday table offerings are rising ahead of the Seollal holiday. According to the Korea Agro-Fisheries & Food Trade Corporation (aT), a survey conducted on the 21st of 28 Seollal seasonal items across 17 traditional markets and 27 large retail stores nationwide showed that traditional markets averaged 263,283 KRW, while large retailers averaged 362,680 KRW. This represents a 14.0% increase from 230,972 KRW last year for traditional markets and a 14.1% increase from 317,923 KRW for large retailers. On the 24th, citizens were shopping at Mangwon Market in Mapo-gu, Seoul.
Photo by Moon Honam munonam@

[Asia Economy Reporter Jang Sehee] The political sphere is rolling out various support measures in response to the prolonged COVID-19 pandemic. First, disaster relief funds will be provided to self-employed individuals and small business owners who have been relatively hard hit, and plans are underway to establish a system for future loss compensation.

According to the Ministry of Economy and Finance on the 31st, the government is comprehensively reviewing disaster relief funds, loss compensation systems, and profit-sharing schemes.

A government official stated, "We need to examine all aspects including the necessity of disaster relief funds, various methods, targets, funding sources, and feasibility of execution," adding, "It seems difficult to reach a conclusion before the Lunar New Year." The official also added, "Especially if institutionalized, it is hard to revise later, so thorough review is necessary."

In fact, Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance, has previously expressed that a quick review of loss compensation for the self-employed is not possible.

The Democratic Party has proposed a bill with specific details on loss compensation for the self-employed, including differentiated support of 50-70% based on the difference from past sales according to the level of business restrictions, and support for losses after business restrictions at the minimum wage level.

The problem lies in funding. The Ministry of Economy and Finance predicted this year’s government debt and national debt ratio to be 956 trillion won and 47.3%, respectively, but if loss compensation for the self-employed and the 4th disaster relief fund payment are confirmed, it is expected that debt will exceed 1,000 trillion won within the year. The Korea Economic Research Institute recently forecasted that if the national debt ratio rises to 99.6% by 2045, the credit rating will drop by two levels.

The scale of deficit bonds to be issued this year already amounts to 91.9 trillion won. Last year, an unprecedented four supplementary budgets led to the issuance of 104 trillion won in government bonds.

Regarding this, Professor Kim Sang-bong of Hansung University’s Department of Economics said, "Providing the 4th disaster relief fund to all citizens is a burden on the finances," and added, "The loss compensation system should also avoid direct injection of national finances and instead support the self-employed through ultra-low interest loans, etc."

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