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Korea plans another W605tr 'super budget' for 2022

Finance Minister Hong Nam-ki speaks during a consultative meeting between the party and the government held at the National Assembly in Seoul, Tuesday. (Yonhap)
Finance Minister Hong Nam-ki speaks during a consultative meeting between the party and the government held at the National Assembly in Seoul, Tuesday. (Yonhap)

South Korea plans to draw up another record-breaking budget of some 605 trillion won ($518.4 billion) for next year to strengthen the nation’s social safety net largely hurt by the prolonged pandemic, the ruling Democratic Party and the government said Tuesday.

The so-called “super budget package” allows the Moon Jae-in government and his party to financially assist self-employed, small-business owners and low-income families, and to provide full college tuition from the third child of any family and the second child of underprivileged households.

The plans, however, are likely to face backlash from political opponents questioning the motive behind such an extensive scheme at a time when Moon has only eight months left in office. Others also worry that the spending would have to be paid for with higher taxes on wealthy people and corporations.

Despite persisting concerns, President Moon described the scheme as an “encouraging” move. “Unlike policies that require budgeting in the future or require amendment of laws and regulations, this program is already reflected in the state budget for 2022, so young people will be able to feel the benefit right away,” he said.

For the fiscal year of 2021, the government has created a budget totaling 604.7 trillion won, including an annual budget of 558 trillion won and two rounds of COVID-19 supplementary relief, up 18 percent from last year.

The ministry’s proposal, which will be submitted to the Parliament early next month, is the last budget plan to be drawn up by the Moon administration.

Excluding the supplementary budgets, the on-year growth rate of the 2022 budget is expected to reach a mid-range of 8 percent, according to government officials.

Explaining the budgetary direction, Finance Minister Hong Nam-ki, who attended the meeting, said the government sought to maintain an expansionary stance to drive economic recovery and narrow the gaps and inequalities caused by COVID-19, as well as for COVID-19 containment measures.

With a fourth wave of the pandemic showing no signs of abating, small-business owners and the self-employed have continued to bear the brunt of the damages due to social distancing rules that have been raised to the highest level for Seoul and its surrounding areas, he said.

“Public finance will play a bigger role as the government is acutely aware of the seriousness of the situation,” he said.

The ministry’s proposal also comes as the Bank of Korea prepares to tighten its monetary policy.

The ruling party has been asking the government to secure a sufficient budget to provide financial measures such as low-interest loans for small businesses with a poor credit score in addition to 1.8 trillion won in compensation for losses caused by the pandemic to the self-employed and small-business owners.

According to the party chief, the government agreed to pour over 20 trillion won into a comprehensive measure supporting young adults who struggle to find a job or place to live. The scheme includes an interest-free loan program for young people with an annual income less than 50 million won to pay their monthly rent.

The state budget will also be used to secure a supply of vaccines large enough to vaccinate the entire population and to expand infrastructure and equipment for infectious disease control such as negative pressure beds.

Some 2.5 trillion won in funds dedicated to the country’s goal to achieve net-zero greenhouse gas emissions will also be set up, the party said.

By Park Han-na (