Saneun and Su-eun, Government Support Budget Execution Lagging Behind

[Asia Economy Reporter Song Hwajeong] There have been criticisms that the execution of government budgets allocated to the Korea Development Bank (KDB) and the Export-Import Bank of Korea (KEXIM) has been sluggish.

According to the National Assembly Budget Office on the 16th, the government supported KDB with a total of 1.8817 trillion KRW, including 1.6521 trillion KRW through the third supplementary budget in 2020 and 229.6 billion KRW through the main budget in 2021, to operate financial market stabilization programs in response to the COVID-19 crisis. Specifically, these funds were intended to operate programs such as the Stock Market Stabilization Fund, Bond Market Stabilization Fund, rapid underwriting and self-refinancing of corporate bonds, Korea Credit Guarantee Fund (KODIT) credit-enhanced Commercial Paper (CP), self-refinancing of corporate CP, loans for small and medium-sized enterprises (SMEs) and mid-sized companies, support for low-cost carriers (LCC), and the Special Purpose Vehicle (SPV) program for corporate liquidity support.

As of March this year, the actual supply performance of the financial market stabilization programs supported by KDB showed that only 9.8142 trillion KRW out of the total planned supply of 19.9 trillion KRW was executed, resulting in an execution rate of 49.3%. The execution rates for the Stock Market Stabilization Fund and the Bond Market Stabilization Fund as of March were 1.0% and 15.0%, respectively. Although there has been no supply performance since 2021, KDB was supported with 67.9 billion KRW and 91.7 billion KRW in the 2021 main budget for the operation of these funds. Additionally, the execution rates for rapid underwriting and self-refinancing of corporate bonds and KODIT credit-enhanced CP were also low, below 30%.

KEXIM’s special account budget execution is delayed. KEXIM’s equity investment (special account) projects are initiatives where the government and KEXIM jointly share resources by establishing special accounts to support infrastructure projects in countries rated B+ or below, where support through general accounts is difficult, such as reconstruction in Iraq. These projects aim to help Korean companies secure emerging markets in low-credit countries. KEXIM received a total of 325 billion KRW in equity investment budgets from the government: 30 billion KRW in 2019, 160 billion KRW in 2020, 110 billion KRW in 2021, and 25 billion KRW in 2022.

Since establishing the special account in 2019, KEXIM and the government have jointly raised 1 trillion KRW (500 billion KRW each) as the first phase of the special account fund as of March 2022. In 2022, an additional 62.5 billion KRW (25 billion KRW from the government and 37.5 billion KRW from KEXIM) will be raised, operating a total special account of 1.0625 trillion KRW. As of March, the amount supported from the special account was 634.3 billion KRW, leaving an unused amount of approximately 428.2 billion KRW. The execution rate stands at 59.7%.

As of March, KEXIM is reviewing nine projects related to the special account, six of which are related to the Iraqi government. An Okjin, Budget Analyst at the Public Institution Evaluation Division of the Budget Office, analyzed, "The Iraqi government’s fiscal balance has improved due to increased fiscal revenues from recent oil price rises, reducing the need for external borrowing from institutions like KEXIM. Additionally, internal political conflicts in Iraq have delayed cabinet formation and the approval of the 2022 budget, increasing the likelihood of delays in projects related to the special account."

Analyst An stated, "The government continuously supports financial public institutions with budgets to ensure smooth execution of policy finance support tasks. However, some programs have underperformed in executing the large-scale budgets provided in response to the COVID-19 crisis, resulting in unused funds. It is necessary to review active utilization plans for these budgets."

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