Government: "COVID Loss Compensation Faces Fiscal Limits... Utilizing Deductibles and Insurance"

The 2nd Financial Management Strategy Committee

Ando-geol, the 2nd Vice Minister of the Ministry of Economy and Finance, is speaking at the "2nd Fiscal Management Strategy Committee" held at the Government Seoul Office Building on the 29th. (Photo by Ministry of Economy and Finance)

[Sejong=Asia Economy Reporter Son Seon-hee] The government clearly opposed the "loss compensation legislation" that compensates for sales damage caused by quarantine measures due to the COVID-19 crisis, stating that "there are limits to compensating for enormous damages solely through government financial support." However, it expressed agreement on the necessity of damage support and announced plans to utilize various measures such as mutual aid and insurance.

On the afternoon of the 29th, Ando-geol, the 2nd Vice Minister of the Ministry of Economy and Finance, presided over the "2nd Fiscal Management Strategy Committee" at the Government Seoul Office and discussed issues including the fiscal status, the Ministry of Economy and Finance said.

The discussion included the "Plan to Establish a Multi-layered Damage Support System for Small Business Owners in Social Disasters." The Ministry of Economy and Finance stated, "We shared the recognition that it is necessary to establish a multi-layered damage support system utilizing various measures such as government direct damage support, mutual aid systems, and private insurance to ensure sufficient support for damages."

Currently, the "loss compensation legislation plan" is being discussed mainly in the National Assembly, and this emphasized the existing fiscal authorities' position that it is difficult to "compensate" solely with government finances.

However, to utilize mutual aid, insurance, and other measures beyond financial support, the government formed a task force (TF) consisting of related ministries and experts, including the Ministry of Economy and Finance, the Ministry of SMEs and Startups, the Ministry of the Interior and Safety, and the Financial Services Commission. In this regard, a joint research project with the Organisation for Economic Co-operation and Development (OECD), where discussions on policy-oriented private insurance are active, was launched last month. The research project plans to review sustainable support systems including ▲ institutionalization of government damage support ▲ revitalization of mutual aid systems for small business owners ▲ strengthening the function of private insurance. It will proceed until November.

The Ministry of Economy and Finance plans to review these contents and, if necessary, reflect them in next year's budget proposal and promptly implement them.

Additionally, the committee members attending the meeting discussed major achievements of national tasks and key investment directions for next year. Since the fiscal sector played an active role during the COVID-19 crisis by preparing four supplementary budgets last year, the 2024 budget will gradually normalize temporary expenditure projects and strongly promote expenditure restructuring by reducing major current expenses in the public sector.

Vice Minister Ahn inspected the overall fiscal status and urged, "Although we maintain a favorable national debt level compared to major countries, considering recent debt growth speed, potential fiscal risk factors such as aging, and the special characteristics of a non-reserve currency country, proactive measures are necessary." He added, "Strategic prioritization of resource allocation, innovation in fiscal management methods, and strengthening fiscal total management such as Korean-style fiscal rules are urgently needed."

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