Hong Nam-ki "Second Disaster Relief Fund Must Be 100% Financed by Government Bonds... Difficult to Provide to All Citizens"

Deputy Prime Minister for Economy Hong Nam-ki is deep in thought while attending the full meeting of the Budget and Accounts Committee held at the National Assembly on the 24th. Photo by Yoon Dong-ju doso7@

[Asia Economy Reporter Kim Hyemin] Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance, said on the 24th, "If a second disaster relief fund is provided, it is unlikely to be in the same form as the first support fund."

Deputy Prime Minister Hong made this remark in response to a question from Kim Min-seok, a member of the Democratic Party of Korea, at the National Assembly Budget and Accounts Special Committee on the same day.

In response to Kim's question, "Did the ruling party, government, and Blue House postpone discussions on the second support fund at yesterday's meeting, or did they judge it unnecessary?" Hong explained, "We will observe the situation until this week and consider the economic trends before making a future decision."

He stated, "Compared to the first payment, the economy is showing considerable signs of recovery now, but since the spread of COVID-19 has appeared, the economic conditions are still judged to be better than during the first time," adding, "This week's trends are important."

Deputy Prime Minister Hong also believed that even if the second support fund is provided, nationwide payments like the first time would be difficult. He emphasized, "The purpose of providing disaster relief funds is important. The first time was aimed at stimulating consumption, but now consumption stimulation is not a decided matter. I think it is appropriate to provide tailored support to vulnerable groups."

Regarding the funding for the second support fund, he said, "We have no choice but to rely 100% on government bond issuance." Hong explained, "During the first support, we covered it by restructuring the existing budget, and during the second and third supplementary budgets, we additionally restructured 25 trillion won focusing on projects difficult to execute this year. Since there is little budget left for the remaining period, even if we restructure, there are limits, and we have practically done almost all possible restructuring."

Regarding calls to cut public servant wages, he expressed a negative stance, saying, "Ministers and vice ministers have been returning 30% of their wages for four months, and small additional returns seem possible, but to secure funds from public servant wages, we would have to cut the wages of lower-level employees who account for 80% of personnel expenses. It would require the consensus of one million lower-level public servants, and with only four months left, it seems unlikely to generate much funding."

Deputy Prime Minister Hong agreed with Kim's assertion that public sector expenditure innovation is necessary, emphasizing, "Public sector expenditure restructuring should be prioritized regardless of COVID-19. The Ministry of Economy and Finance has approached budget drafting and approval from that perspective, but if insufficient, we fully agree that the pace should be accelerated."