[Asia Economy Reporters Park Cheol-eung, Kim Hyun-jung] The Democratic Party of Korea has decided to include customized disaster relief funds for vulnerable groups in next year’s budget, sparking expected controversy over how to secure the funding. The People Power Party is demanding cuts to the Korean New Deal budget, but the Democratic Party dismisses this, saying it would be like “cutting the belly of the goose that lays the golden eggs for the future.” Ultimately, additional government bond issuance appears inevitable, likely triggering another debate over fiscal soundness and deepening the Ministry of Economy and Finance’s concerns.
On the 26th, a Democratic Party official said, “While the scale of the (third) disaster relief fund will be determined through overall coordination of next year’s budget by the Budget and Accounts Special Committee, the method of securing funds inevitably involves issuing government bonds.”
The second disaster relief fund, paid out in September, was implemented through a supplementary budget of 7.8 trillion won, mostly covered by deficit bond issuance. The Democratic Party initially showed a negative stance toward including the third disaster relief fund in the budget, citing tight physical timelines, but then made a sudden shift. Until Democratic Party leader Lee Nak-yeon mentioned budget inclusion for vulnerable groups’ support on the 25th, concerns about funding had been raised.
Kim Young-jin, the Democratic Party’s floor deputy leader, appeared on MBC Radio’s “Kim Jong-bae’s Focus” on the 24th, saying, “It is not possible to quickly proceed with surveying demand, determining the amount, scale, recipients, and scope within a week. Without issuing government bonds, there is no funding available to support disaster relief funds. This matter requires bipartisan agreement and national consensus.”
The People Power Party is strongly demanding cuts to the Korean New Deal budget, making it difficult to gain consent for government bond issuance. The scale of support is also a key issue. The Democratic Party has clearly stated that the support will be special and customized for particularly hard-hit groups. The possibility of pursuing universal payments, as advocated by Gyeonggi Province Governor Lee Jae-myung and others, appears extremely low.
The People Power Party has proposed a budget of about 3.6 trillion won, roughly half the size of the second disaster relief fund. Within the Democratic Party, some have suggested setting the third disaster relief fund at around 2 trillion won as special support, but this remains flexible. This is because the extent of damage from the COVID-19 resurgence and various variables such as the future commercialization of treatments must be considered. The possibility of pushing for a figure similar to the second fund, around 7 trillion won, cannot be ruled out. Currently, the direction is only to increase contingency funds and use them later under the name of “disaster damage measures.”
The People Power Party emphasizes fiscal soundness, making discussions difficult. On the same day, Bae Jun-young, spokesperson for the People Power Party, said in a statement, “Saying that not a single won of the government budget can be touched is an abandonment of the National Assembly’s own responsibilities. The national debt ratio is already approaching 44% of GDP, and it is expected to rise to 47% next year.”
The Ministry of Economy and Finance is being cautious. Kim Yong-beom, the first vice minister of the Ministry of Economy and Finance, said at the 6th Korean New Deal Ministerial Meeting and the 21st Emergency Economic Central Disaster and Safety Countermeasure Headquarters regular briefing held at the Government Seoul Office in the morning, when asked about the government’s stance on the third disaster relief fund, “There will be discussions on this issue in the National Assembly, but the important thing is that next year’s budget must be finalized by the legal deadline of December 2.” This appears to be a subtle expression of the difficulty in reflecting the third disaster relief fund in the budget by the legal deadline.
A government official said, “If the ruling and opposition parties reach an agreement, the government will prepare related alternatives accordingly.”
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
