Extra budget bill of W7.6tr proposed to aid virus-hit households

The government on Thursday unveiled a second extra budget bill worth 7.6 trillion won ($6.2 billion) to provide emergency relief to households amid the economic fallout of the COVID-19 pandemic.

The amount will be provided entirely by slashing other expenditure and readjusting government funds, without issuing additional bonds, officials said.

“In order to finance the 9.7 trillion won required to pay out the emergency disaster relief funds, (the government) has drafted a 7.6 trillion won extra budget bill,” said Deputy Prime Minister and Finance Minister Hong Nam-ki.

Combined with the 2.1 trillion won from local governments, the amount will be spent solely on providing special subsidies to the nation’s bottom 70 percent income group.

In an emergency economic meeting on March 30, President Moon Jae-in announced a plan to give special subsidies to households struck by the new coronavirus epidemic.

Under the disaster relief plan, 1 million won will be given to each household with four or more people that fall under the bottom 70 percent of gross income. Smaller households will receive an amount ranging from 400,000 won to 800,000 won, depending on their size.

Of the 20 million households, almost 15 million are expected to be eligible for the subsidies. The payment will take place in the forms of digital cash or local merchandise coupons.

“Considering that the impact of the given funds require speedy execution, (the government) is hereby submitting this (special purpose) budget plan to the National Assembly,” Hong said.

“The bottom 70 percent rule was decided in consideration of emergency, equity, and limited fiscal resources.”

The classification of households will be based on the health insurance fees as of end-March.

But high net worth individuals and households -- for instance, people who fall in the property tax base of 900 million won or more, or households that make 20 million won or more in annual financial income -- will be excluded from the subsidies, regardless of their income level.

The latest budget bill is the fifth extra budget planning under the incumbent Moon administration, as well as the first time since 2003 that the country has drafted two extra budget bills within a single year.

It will also be noted for the absence of additional sovereign debts as it will secure the necessary financial resources by slashing other expenditure and adjusting government funds.

The implementation of the 7.6 trillion won budget is expected to increase the nation’s fiscal deficit to 45 trillion won from the current 41.5 trillion won.

Previously, the National Assembly approved a 11.7 trillion won supplementary budget, the single-largest amount drafted to tackle the fallout of an epidemic.

By Bae Hyun-jung (tellme@heraldcorp.com)