The government sent an 11.8 trillion won ($10.5 billion) supplementary budget bill to the National Assembly on Monday.
The extra spending plan is part of a stimulus package of 22 trillion won the government is pushing to prop up the economy, which has been ailing due to sluggish exports and weak domestic consumption.
The outbreak of Middle East respiratory syndrome that battered consumer spending and service sectors like tourism and the extended drought added urgency to the task of providing a shot in the arm for the economy.
Of the extra budget, 5.6 trillion won will be used to make up for tax revenue shortfalls caused by weak consumption, and the remaining 6.2 trillion won will be used to reinvigorate the economy, of which 2.5 trillion won will be spent on MERS-related programs.
Now subject to parliamentary scrutiny, the plan calls for the government to raise as much as 9.6 trillion won of the total by issuing government bonds. This alone would raise the ratio of government debt to gross domestic product by 1.8 percentage points to 37.5 percent.
The opposition has some good reasons to vow close scrutiny over the plan. The New Politics Alliance for Democracy has already expressed opposition to some key elements of the extra budget bill, including the fact that 5.6 trillion won was earmarked for making up for tax revenue shortfalls.
It is also not entirely wrong for the opposition to suspect that part of the 1.3 trillion won that would go to infrastructure projects are pork barrel projects aimed at helping the ruling party in next year’s parliamentary elections.
Citing these and other reasons, the NPAD opposes the government and the ruling party’s plan to get the budget bill through the National Assembly by July 20. It insists that there should not be any deadline and that it will put forward its own budget bill no later than Wednesday.
Again, some of the opposition’s arguments make sense, but its hardline stance raises concerns that the spending plan may be held up by partisan strife ― which is common at our parliament.
The government draws up an extra budget at the risk of worsening its fiscal position because it allows public funds to be pumped into the economy immediately. The economy would be able to benefit from the increased public spending as early as early August if the National Assembly passes the bill around July 20.
This is important because MERS has already been taking its toll on the economy, particularly in services like travel, leisure and retail. The upheaval in Greece also adds urgency to the pump-priming measures.
As the MERS outbreak shows signs of abatement, private companies and local governments are taking the lead in resuscitating economic sentiment and consumer spending.
Samsung Group said it would buy 30 billion won worth of gift certificates used in traditional markets and they would be handed out to employees of contractors and suppliers. It will also invite 1,000 employees working for Samsung units in China and Southeast Asian countries, a measure to help the tourism sector which had been hit hardest by the MERS outbreak. Other conglomerates, financial institutions and local governments are also taking various measures to help the economy daunted by the contagious disease.
The National Assembly’s fast action on the supplementary budget will maximize the pan-national efforts to fight the effects of the MERS outbreak and revitalize the economy. The opposition ought to bear in mind that timing is one of the most important factors in ensuring the success of the supplementary budget.