'Supplementary Budget of 14 Trillion Won' Confirmed by Government... Ruling Party Plans to Increase

Mention of 10 Million Won Support for Small Business Owners by Some Lawmakers... Government's 3 Million Won Support Is Triple
Closed Discussions Between Ruling Party and Government... Parliamentary Struggles Expected to Intensify if Opposition Joins

[Asia Economy reporters Son Seon-hee (Sejong), Oh Ju-yeon, Lee Hyun-joo] As the ruling party and the government have entered behind-the-scenes consultations to prepare a supplementary budget (추경) bill early this year, the possibility of '14 trillion won + α' is gaining weight. The government unusually announced the supplementary budget size of '14 trillion won' ahead of the ruling party-government consultations, but the ruling Democratic Party of Korea demands at least 25 trillion won or more, making the increase in the amount a major issue during the National Assembly discussions.

According to the National Assembly and government on the 17th, the Ministry of Economy and Finance and the Democratic Party are expected to hold unofficial ruling party-government meetings to discuss the preparation of the supplementary budget bill. They appear to be accelerating discussions ahead of the submission to the National Assembly next week. Park Wan-joo, the Democratic Party Policy Committee Chair, said to reporters at the National Assembly in the morning, "There will be overall agreement on increasing the number of self-employed people eligible for the quarantine support fund to 3.2 million." He mentioned the amount of support money as an idea, referring to "10 million won," which is more than three times the 3 million won the government plans to provide through the supplementary budget. However, regarding the possibility of increasing the support amount, he expressed caution, saying, "The public needs to agree."

If the government submits the supplementary budget bill to the National Assembly just before the Lunar New Year, differences between the ruling and opposition parties and the government are expected to become clearer. The government has defined this supplementary budget as a 'one-point supplementary budget' for small business support and strengthening quarantine measures, limiting it to 14 trillion won. However, the Democratic Party is preparing to push for an increase. The government’s proposal is far from the 25 to 30 trillion won supplementary budget size demanded by Lee Jae-myung, the Democratic Party’s presidential candidate. It is also likely that the scope and amount of the quarantine support fund will be expanded. Given that this is a supplementary budget right before the presidential election, the opposition party is also expected to actively participate in the discussions.

The ruling party and government are expected to show a power struggle as they prepare the 10th supplementary budget since the Moon Jae-in administration, and the earliest ever in terms of timing. While rushing to ensure that quarantine support funds are paid as soon as possible to small business owners and self-employed people pushed into livelihood crises by the prolonged COVID-19 situation, there is a considerable possibility of conflict over the support targets and amounts, given the upcoming March presidential election. The supplementary budget bill is expected to pass the National Assembly plenary session around early to mid-next month and be executed before the presidential election day (March 9).

There is currently a significant gap between the supplementary budget sizes proposed by the financial authorities and the political circles. Candidate Lee Jae-myung mentioned 25 to 30 trillion won, and Yoon Seok-youl, the People Power Party’s presidential candidate, also said that the government’s 3 million won support should be "much larger." Therefore, there is strong expectation that a demand for an increase will be strongly made during the National Assembly review process. It is also not impossible that the financial authorities, which made a 60 trillion won error (about 29 trillion won excluding previous revenue adjustments) in last year’s tax revenue forecast, could lose the power struggle again.

The unofficial ruling party-government consultation held as early as today is the starting point of the discussion. The ruling party and government are expected to discuss the size of the quarantine support fund and the scope of eligible recipients. Earlier, the government announced plans to provide 3 million won each as quarantine support funds to 3.2 million small business owners whose sales have decreased due to strengthened quarantine measures. The required budget for this is about 10 trillion won.

The Democratic Party insists that this amount should be significantly increased. Within the party, there has been talk of providing up to 10 million won. This is more than three times the amount announced by the government. Park Wan-joo mentioned the possibility of such a payment to reporters at the National Assembly in the morning but added, "It is not sufficient, but the taxpayers need to agree."

On the other hand, the Ministry of Economy and Finance drew a line, saying it is "not considering" increasing the amount of the quarantine support fund. Although excess tax revenue is expected to be up to 10 trillion won more than the government’s estimate of 19 trillion won last year, it cannot be used before the April settlement. Since most of the supplementary budget funds must be financed by deficit bonds, increasing the size would inevitably be a significant burden on the finances. The national debt size based on this year’s main budget reaches 1,068.3 trillion won.

If the ruling party does not relent in demanding an increase in the support amount and recipients during the National Assembly review process, the possibility of an increase in the supplementary budget size cannot be ruled out. Jeon Yong-gi, the Democratic Party spokesperson, emphasized again in a phone call today, "To provide clear compensation for losses to small business owners and self-employed people going through difficult times due to COVID-19, the Democratic Party’s position is that at least 25 trillion won is necessary." He added, "We hope to gradually increase the supplementary budget size through continuous consultations with the government" and "We will try to speed up the process as much as possible."

The opposition party also agrees that the supplementary budget should be increased. However, there is dissatisfaction about rushing the supplementary budget preparation to execute it before the presidential election. Ryu Seong-gul, the People Power Party lawmaker and ranking member of the National Assembly’s Planning and Finance Committee, said in a phone call, "Support should be provided by accurately assessing the loss scale to effectively help small business owners and self-employed people in difficult situations," but added, "However, preparing a supplementary budget right before the election can be seen as a vote-buying act, so discussion is needed."