The First-Ever 'Snowflake Supplementary Budget' Proposed Faster Than Cherry Blossoms... Ruling Party Says "Missing the Timing Will Diminish Its Significance"

Decision on Supplementary Budget Formation Likely Through Party-Government Review Within This Month
Issuance of Government Bonds Inevitable to Secure 30 Trillion Won in Funds
Concerns Raised Over Hasty Formation Ahead of Presidential Election

Yoon Ho-jung, the floor leader of the Democratic Party of Korea, is delivering opening remarks at the joint meeting on the New Year's supplementary budget to overcome COVID-19 held at the National Assembly on the 5th. Photo by Yoon Dong-ju

[Asia Economy Reporters Kim Hyunjung (Sejong), Oh Jooyeon] As the ruling party, centered around Lee Jae-myung, the Democratic Party presidential candidate, demands a supplementary budget of up to 30 trillion won ‘before the Lunar New Year holiday,’ the possibility of the fastest-ever ‘snowflake supplementary budget’ being pushed right at the start of the new year is increasing. However, with the recent COVID-19 spread somewhat easing and additional funding measures not clearly reviewed, there are concerns about a hasty formation ahead of the presidential election if it is pushed through recklessly.

On the 5th, Yoon Hojung, the floor leader of the Democratic Party, said at the 'New Year Supplementary Budget Joint Meeting for Overcoming COVID-19,' "If we miss the timing, both the meaning and role will fade. We will make it a true New Year supplementary budget," adding, "As Candidate Lee officially discussed supplementary budget formation the day before, we will speed up the New Year supplementary budget based on three principles: covering the entire amount, doing it in advance rather than afterward, and prioritizing fiscal over financial support." Park Wanju, the chairman of the Policy Committee, also emphasized at the meeting, "It is desirable for the ruling and opposition parties to discuss and lead the supplementary budget formation in the National Assembly and to process it within the February session to resolve on-site hardships as quickly as possible." Regarding the payment method, Park added, "Since the government has proactively accepted an advance payment policy, there are various methods such as financial support, cash support, and local currency, and we will keep the most effective method open for review."

The party and government plan to review the supplementary budget formation by the end of this month at the earliest after examining additional quarantine situations and fiscal conditions. Since the daily new COVID-19 cases have decreased to around 3,000 to 4,000 recently, and the decision on whether to extend social distancing guidelines will be made around mid-month, the decision will be made considering the overall situation. The ‘pre-Lunar New Year supplementary budget’ advocated by Candidate Lee is interpreted not as an intention to complete all reviews and start payments to small business owners and self-employed immediately within this month, but rather to gather consensus and reach a conclusion within this month.

The government remains open to the possibility but shows a negative stance toward the ruling party’s push. This is because there is no precedent for forming a supplementary budget right at the start of the new year. Hong Namki, Deputy Prime Minister and Minister of Economy and Finance, recently told reporters that while he hinted at the possibility of a supplementary budget, "There may be various opinions on whether it is appropriate to discuss a supplementary budget on the first day of executing the 2022 budget." This is interpreted to mean that it is not yet time to discuss supplementary budget formation as the execution business days of the largest-ever budget of about 607 trillion won in 2022 have not even reached a week.

The earliest supplementary budget formation was on February 8, 1998 (submission of supplementary budget bill), during the International Monetary Fund (IMF) foreign exchange crisis when restructuring funds had to be secured. Excluding 2020 (March 5) and 2021 (March 4) for COVID-19 response, early spring formations such as in 1999 (March 31, unemployment measures) and 2009 (March 30, global financial crisis response) are considered ‘Cherry Blossom Supplementary Budgets’ cases.

There are also concerns about pushing forward a supplementary budget of a significant portion of the government budget, which is formed over several months, based on a presidential candidate’s demands. A government official explained, "Although the annual budget exceeds 600 trillion won, excluding rigid budgets, the budget that the government can flexibly form based on economic conditions or needs is about 100 trillion won." Considering the structure where budget requests are received from each ministry by the end of May and reviewed over about three months, there are concerns about hasty promotion in the process of discussing, forming, and executing a supplementary budget amounting to 30% of the government’s flexible budget within a short period.

It is also burdensome that most of the funds must be raised through borrowing. Most of the funds needed for a supplementary budget of up to 30 trillion won must be covered by issuing government bonds. Candidate Lee also acknowledged the inevitability of debt-based support during a New Year press conference held on the 4th at Kia Autoland Gwangmyeong in Gwangmyeong, Gyeonggi Province, saying, "If the National Assembly requests large-scale support including government bond issuance, the government would have no reason to refuse or reject."

Earlier, the government planned to use the existing budget, funds, and reserves for the quarantine support fund payment (4.3 trillion won) announced at the end of last year. A significant portion of this year’s 3.9 trillion won in reserves is expected to be used for quarantine support funds. For the advance payment project of loss compensation, which is about 2.7 trillion won, a budget of 3.2 trillion won will be used this year, and some of the advance payments will be converted into loans and recovered with interest. Therefore, it is difficult to accurately estimate how much additional funding is specifically available.

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