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Government seeks to spend W6tr for economic recovery

Finance Ministry, ruling party to finalize extra budget next week

South Korea’s Ministry of Strategy and Finance said Thursday that it is expected to come up with detailed figures for its supplementary budget after a Cabinet meeting next week.

The Finance Ministry announced last month that it will carry out an expansionary fiscal policy by allocating extra spending of some 10 trillion won ($8.7 billion) for job creation in the latter half of this year.

Local media reported that the Finance Ministry has reached an agreement with the Saenuri Party to spend around 6 trillion won of the 10 trillion won in its supplementary budget “purely for economic recovery.” This would include spurring regional growth hit by corporate restructuring and creating alternative employment for people taking the blow of the restructuring.

This would mark the biggest spending for such purposes since 2009 during the global financial crisis when the government spent an additional 28.4 trillion won to support small and medium-size enterprises and the self-employed as well as create jobs and expand regional infrastructure.

This would also exceed last year’s 2.7 trillion won spending for economic recovery, which was part of the government’s 11.8 trillion-won supplementary budget.

The central government will give 3 trillion won to regional governments and use 1 trillion won to pay back its debt.

However, the Finance Ministry said in a press statement that it is “currently looking into the exact scale and amount of the supplementary budget,” adding that the figures for the regional governments as part of extra spending are not true.

The Finance Ministry said last month that it seeks to spend about 20 trillion won in total in the second half of this year, urging the National Assembly for the rapid passage of its budget proposal, without which the country’s economy might face further deterioration with growth falling below its forecast of 2.8 percent to 2.5 percent.

The government said that it can afford to spend 10 trillion won more from its own coffers without having to issue debt, due to its increased tax revenue. Despite a slowdown, the government expects tax surplus of 9 trillion won this year. This would mark the first time since 2003 for the government to allocate more spending without debt financing. Korea was able to collect 19 trillion won more taxes from January to May this year, compared to the same period a year ago, with tax revenue amounting to 112.7 trillion won.

By Park Hyong-ki (