Yoon's First Test: 'Supplementary Budget Immediately After Inauguration' Pledge... Thorny Path Amid Opposition Majority and Funding Issues

President-elect Yoon Seok-yeol is holding a victory greeting press conference on the morning of the 10th at the National Assembly Library in Yeouido, Seoul. Photo by the National Assembly Press Photographers Group

[Asia Economy Sejong=Reporters Kim Hyewon, Kwon Haeyoung] The first test stage for President-elect Yoon Seok-yeol is whether the pledge to inject additional budget (supplementary budget) funds "immediately upon inauguration" will materialize. With a National Assembly dominated by the opposition and the challenge of securing supplementary budget resources amounting to 50 trillion won, it is widely viewed within government circles that the timing and scale of the supplementary budget may retreat from Yoon’s original pledge.

According to the National Assembly and government on the 11th, if President-elect Yoon intends to execute a supplementary budget worth about 50 trillion won immediately upon his inauguration on May 10, negotiations with the National Assembly on the supplementary budget bill must begin as early as this month or at the latest early next month.

Currently, the Ministry of Economy and Finance is reportedly preparing the supplementary budget bill centered around the Budget Office. However, during the transition period before the official launch of the Yoon Seok-yeol administration, there is little expectation that Deputy Prime Minister and Minister of Economy and Finance Hong Nam-ki will be cooperative, given the awkward coexistence of the two governments. Hong Nam-ki had frequent clashes with the National Assembly over supplementary budgets throughout the Moon Jae-in administration.

Breaking through the opposition-majority National Assembly, where the People Power Party holds 105 seats and the Democratic Party 172 seats, is a precondition President-elect Yoon must solve. If the ruling and opposition parties fail to cooperate, the realization of Yoon’s pledge to provide up to 10 million won in quarantine support funds for small business owners will inevitably be delayed. Previously, the government paid 300 million won each as quarantine support funds to 3.2 million small business owners who experienced sales declines in the first supplementary budget this year, totaling 9.6 trillion won.

The issue is how to secure the resources for the 50 trillion won supplementary budget pledge. The transition team plans to negotiate with the government and National Assembly on securing supplementary budget resources as soon as it is formed, but none of the options?restructuring main budget expenditures or issuing government bonds?is easy. Additionally, a “one-shot” supplementary budget for wildfire damage recovery is expected to be added. In this case, adjustments by budget item in the supplementary budget will be inevitable, possibly requiring cuts in expenditures where funding was promised.

In particular, President-elect Yoon has so far planned to secure resources through expenditure restructuring, but there is a prevailing view that there are limits to cutting tens of trillions of won in the budget. Although budget cuts for large-scale projects such as the “Korean New Deal” and major social overhead capital (SOC) projects will be considered, these are projects driven by the Moon administration or expected to face opposition from local district lawmakers, making it difficult to significantly reduce their scale. A Ministry of Economy and Finance official said, "It is not easy to reduce the budget for projects passed by bipartisan agreement during the coexistence period of the current and next governments," adding, "Opposition from other ministries is also expected, so discussions need to be held over time."

The easiest method is issuing deficit government bonds, but considering the speed of national debt increase and market supply-demand conditions, the volume of government bonds issued cannot be increased indiscriminately. Ultimately, it is expected that the absolute scale of the second supplementary budget will be reduced, with part of the resources procured through deficit government bond issuance.

There is also analysis that the major opposition party will cooperate with the new government’s second supplementary budget formulation. A government official said, "With the local elections coming up in June, the Democratic Party will find it difficult to respond lukewarmly to the new government’s support measures for small business owners," adding, "Since they could face a backlash, some degree of cooperation seems inevitable."

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