[Yoon Administration Supplementary Budget] Record High 59.4 Trillion Won Without National Bond Issuance... Funding from Excess Tax Revenue

[Asia Economy Sejong=Reporters Kim Hyewon, Kwon Haeyoung, Son Seonhee] The Yoon Seok-yeol administration is pushing to draft a supplementary budget (supplementary budget) approaching 60 trillion won by utilizing excess tax revenue without issuing government bonds. This is the largest supplementary budget in history.

The core of this supplementary budget, which was a pledge during Yoon Seok-yeol's presidential campaign, is the 'full compensation for losses' to small business owners affected by COVID-19. About 3.7 million small business owners will receive loss compensation payments ranging from 6 million to 10 million won. The loss compensation adjustment rate will be raised from the current 90% to 100%, and the quarterly minimum amount will also be increased from 500,000 won to 1 million won.

The government approved the second supplementary budget for 2022 containing these details at the Cabinet meeting on the 21st. This is the first supplementary budget under the Yoon administration and the second supplementary budget this year.

Although there is a possibility that the support amount or target may change during the National Assembly's review and approval process, the size of this supplementary budget is 59.4 trillion won, the largest ever. Excluding local transfer expenditures (23 trillion won), the supplementary budget size is 36.4 trillion won. This money is general expenditure used for support of small business owners, livelihood, and quarantine measures.

23 Trillion Won Loss Compensation for 3.7 Million Small Business Owners... '100% (Adjustment Rate) - 1 Million Won (Minimum Amount)' Package Support

The government decided to inject an additional 24.5 trillion won to fully compensate the accumulated damage to small business owners caused by COVID-19 quarantine measures. This includes 23 trillion won for loss compensation payments and 1.5 trillion won for improving the loss compensation system.

For 3.7 million small and micro enterprises and medium-sized enterprises with sales under 3 billion won, loss compensation payments ranging from 6 million to 10 million won will be provided by comprehensively considering each company's sales, damage level, and industry characteristics. The medium-sized enterprises included in this support with sales between 1 billion and 3 billion won are estimated to be around 7,400.

Each company will receive customized payments ranging from a minimum of 6 million won to a maximum of 8 million won based on indexed and graded sales scale and sales decline rate. In particular, about 50 industries or medium-sized enterprises with sales declines of 40% or more, such as travel, air transportation, performance and exhibition, and sports facility operation, will receive support ranging from 7 million to 10 million won.

The loss compensation adjustment rate will be raised to 100%, and the quarterly minimum amount will be increased to 1 million won.

6.1 Trillion Won Support for Additional COVID-19 Testing and Oral Therapeutics Supply

6.1 trillion won will be invested to strengthen quarantine measures, including COVID-19 testing, treatment, living support, and additional procurement of oral therapeutics.

An additional 1.6 trillion won will be allocated for diagnostic testing fees. Budgets of 700 billion won and 1.2 trillion won have been assigned for home and inpatient treatment costs during isolation periods for confirmed cases, living support, and paid leave, respectively.

Furthermore, 800 billion won will be spent to supply an additional 1 million oral therapeutics and 50,000 injectable therapeutics. As a result, 2 million oral therapeutics and 210,000 injectable therapeutics will be introduced.

Up to 1 Million Won Temporary Payment to Low-Income Households... 1.7 Trillion Won Support for Vulnerable Groups' Livelihood Stability

To stabilize the livelihood of low-income households, a temporary living support payment of up to 1 million won (based on a four-person household) will be provided. A total of 2.27 million households are targeted, with 1 trillion won allocated.

A 'three-package financial support' worth 20 trillion won has been prepared for vulnerable groups such as low-income citizens, youth, and university students. During the period of rising interest rates, up to 20 trillion won will be newly supplied to allow real-demand homebuyers to convert high-interest and variable-rate mortgage loans into low-interest and fixed-rate loans. This is a 'refinancing loan' to switch to lower interest rates.

Emergency employment stabilization funds of 1 million won will be provided to vulnerable workers such as special-type workers (special employment types) and freelancers. About 700,000 people in 20 industries, including substitute drivers, door-to-door salespersons, visiting teachers, and insurance planners, are eligible.

Additionally, income stabilization funds of 2 million won will be provided to corporate taxi drivers, charter bus drivers, and non-public route bus drivers. It is estimated that about 161,000 people will benefit. About 30,000 low-income artists will also receive 1 million won activity support funds to support stable creative activities.

This supplementary budget also includes measures to stabilize living costs. In response to the recent surge in international grain prices triggered by Russia's invasion of Ukraine, the government will temporarily support 70% of the increased price to domestic flour milling companies on the condition of 'minimizing price increases.' The government will bear 70% of the price increase compared to December last year, companies will bear 20%, and consumers will bear the remaining 10%.

The government also decided to secure an additional 1 trillion won in contingency funds to respond promptly and swiftly to unforeseen demands such as COVID-19 resurgence and various disasters.

How Is the Zero Government Bond Issuance Funding Secured?

With this supplementary budget, the total expenditure for this year will increase to 676.7 trillion won, up 21.3% from the previous year. The integrated fiscal balance deficit, which shows the state of the national finances, is estimated at 68.5 trillion won, and the national debt is estimated at 1,067.3 trillion won. The national debt-to-GDP ratio will slightly decrease to 49.6% compared to 50.1% in the first supplementary budget.

This is because the Yoon administration is pursuing a 'zero' supplementary budget without issuing government bonds. It will also repay 9 trillion won in government bonds. Instead, a significant portion of the supplementary budget funding will be covered by excess tax revenue. Of the 53.3 trillion won in excess tax revenue this year, 44.3 trillion won (23 trillion won for statutory expenditures and 21.3 trillion won for general expenditures) will be used as supplementary budget funding.

The remainder will be secured through available resources such as global surplus funds and fund surplus funds (8.1 trillion won), and expenditure restructuring (7 trillion won).

The government plans to submit the supplementary budget bill to the National Assembly on the 13th. Acting Prime Minister and Deputy Prime Minister for Economy and Minister of Strategy and Finance, Choo Kyung-ho, said at a joint briefing with related ministries on the second supplementary budget, "The Yoon administration's economic team will overcome the current crisis together with the people starting with this supplementary budget," adding, "The situation is urgent. The affected groups, including small business owners, have already reached a threat to survival beyond a threat to livelihood." He also requested the National Assembly to review and finalize the supplementary budget as quickly as possible.