[Exclusive] Government and Ruling Party Confirm Disaster Relief Fund for Bottom 80% Income Bracket... 1 Million Won for 4-Person Household

Disaster Relief Fund: Choice Between Cash or Local Currency
Up to 1 Million Won for 4-Person Households

[Image source=Yonhap News]

[Asia Economy Reporters Kim Hyunjung and Jang Sehee] The government and the ruling party have confirmed that the disaster relief fund included in this year's second supplementary budget (supplementary budget) will target the bottom 80% of income earners. Based on a four-person household, 1 million KRW will be provided, and the payment method will allow recipients to choose between cash or local currency, as was the case with the second supplementary budget last year.

According to the Democratic Party on the 24th, the ruling party and government confirmed that the target for the fifth disaster relief fund, provided after the COVID-19 crisis, will be the bottom 80% of income earners. A key Democratic Party official stated, "The disaster relief fund has been coordinated to be paid to the bottom 80% of income earners," adding, "Up to 1 million KRW will be provided based on a four-person household."

Initially, the Democratic Party insisted on the principle of "universal payment" for this disaster relief fund and mentioned payment plans targeting the bottom 80-90% of income earners. On the other hand, the Ministry of Economy and Finance, the main ministry in charge, had advocated for focusing payments more heavily on the affected groups, proposing the bottom 70%. However, both sides stepped back on the 24th and reached a compromise. Notably, while the Democratic Party has publicly emphasized the principle of universal disaster relief payments, it is reported that the ruling party and government have effectively agreed to exclude high-income earners in their internal discussions. They also believe that the credit card cashback program, which is a nationwide consumption stimulus measure, can complement the remaining portion.

The cashback program is considering a plan where if the amount spent by credit card in the third quarter (July to September) exceeds that of the second quarter (April to June) of this year, 10% of the excess amount will be refunded. However, the ruling party and government are in final negotiations over the maximum cashback limits, which are set at either 500,000 KRW or 300,000 KRW. Consumption at large supermarkets and durable goods such as automobiles will be excluded.

The amount will be 1 million KRW based on households of four or more, the same as the nationwide disaster relief fund last year. Previously, the government provided support funds four times after the COVID-19 crisis. The first round targeted the entire population, providing up to 1 million KRW for a four-person household, while the second to fourth rounds provided tailored support funds to small business owners and vulnerable employment groups. The payment method will allow recipients to choose between credit/debit cards or local currency, whichever is more convenient, as was the case with the second supplementary budget last year.

The total supplementary budget size is at the level of 30 trillion KRW as previously announced by the government, and since it will be financed using excess tax revenue without issuing additional deficit bonds, national debt will not increase.

Along with this, the ruling party and government are also considering providing tailored support funds of up to around 7 million KRW to small business owners and self-employed individuals in affected sectors. Once discussions are completed, the ruling party and government plan to submit the related supplementary budget bill to the National Assembly early next month, with tailored support funds for small business owners possibly being paid as early as August, and general disaster relief funds around September.