Government to Provide Self-Employed with '1%' Ultra-Low Interest Loans Using Excess Tax Revenue

'Limit of 20 Million Won' for Self-Employed Excluded from Loss Compensation

[Sejong=Asia Economy Reporter Son Sunhee] The government is providing loans at a record low interest rate of 1.0% to self-employed individuals in travel, tourism, lodging, and performance sectors who were effectively pushed to the brink of extinction due to the COVID-19 crisis but did not receive compensation for losses. The loan limit is 20 million KRW. Burdens such as electricity bills and industrial accident insurance premiums will also be temporarily reduced.

On the 23rd, Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance, held an emergency economic central countermeasure meeting at the Government Seoul Office and announced a 12.7 trillion KRW livelihood support plan, including support measures for industries not eligible for loss compensation. Deputy Prime Minister Hong said, "We secured funds by mobilizing excess tax revenue and existing budgets," adding, "We plan to concentrate policy efforts on supporting small business damages, stabilizing livelihoods, and boosting domestic demand while paying attention to the quarantine situation."

The core of this livelihood support plan is the support for industries not eligible for loss compensation, totaling 9.4 trillion KRW. A new supply of 2 trillion KRW in ‘Special Recovery Loans’ with an interest rate of 1.0% and a limit of 20 million KRW will be provided to industries that were subject to ‘personnel and facility usage restrictions’ during the COVID-19 crisis. Assuming loans are taken up to the maximum limit, about 100,000 people will benefit. These industries suffered operational damages due to personnel restrictions and other measures during the COVID-19 crisis but did not receive separate support because loss compensation eligibility was determined solely by whether ‘business suspension or operating hour restrictions’ were applied.

The scope of existing emergency loans for small business owners has also been expanded. In particular, for tourism loans targeting travel and lodging industries, the government will temporarily reduce the interest rate by up to 1 percentage point on the entire outstanding loan balance of 3.6 trillion KRW as of this year. A one-year principal repayment deferral will also be supported.

The government did not include cash-type support like loss compensation in the measures. However, it believes that significantly lowering loan interest rates during a period of rising interest rates can effectively reduce cost burdens.

Additionally, from next month until January next year, electricity bills will be halved up to a maximum limit of 200,000 KRW, and industrial accident insurance premiums will be cut by 30% for two months. A total of 940,000 businesses, including those not eligible for loss compensation and those that have already received loss compensation, will be covered.

Besides small business support measures, the government will implement support measures for vulnerable employment groups by reinforcing job-seeker allowance funding by 1.3 trillion KRW and invest 400 billion KRW in price stabilization measures such as stabilizing prices of agricultural and livestock products.

This livelihood support plan uses 5.3 trillion KRW from the expected 19 trillion KRW in excess tax revenue by the end of the year, excluding grants (40%, 7.6 trillion KRW). Additionally, 2.5 trillion KRW will be used to reduce government bond issuance to improve fiscal soundness. The remaining surplus funds will be carried over to next year.

Ahn Do-geol, 2nd Vice Minister of the Ministry of Economy and Finance, said, "Stabilizing the government bond market at the end of the year is very important," adding, "Last year, the government bond issuance volume in December was about 5.3 trillion KRW, and this year it was expected to be around 8.5 trillion KRW, but we judged it necessary to adjust the supply volume to last year’s level to avoid burdening the market."

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