Amid growing calls in the political arena for the formation of a supplementary budget following the disaster caused by the 'large wildfire,' a debate is intensifying between the ruling and opposition parties over whether the 'debts from national treasury' card, with a limit of 1.5 trillion won, can serve as an alternative to the supplementary budget. Debts from national treasury are a form of government 'debt financing' that allows the government to incur debt for the next year’s budget.
According to the political arena on the 28th, Jin Seong-jun, the Policy Committee Chairman of the Democratic Party of Korea, remarked at a policy coordination meeting the previous day that "a supplementary budget for wildfire response is unnecessary," noting that 'disaster countermeasures fund,' 'purpose reserve fund,' and 'debts from national treasury' (1.5 trillion won) could be mobilized. He stated that if the existing budget and reserve fund are insufficient, 'debts from national treasury' can also be deployed.
On the other hand, the People Power Party issued a statement the same day claiming that the 1.5 trillion won budget from debts from national treasury can only be used for facility recovery and cannot be utilized for compensation or living expenses for disaster-affected residents. They asserted that it is not an immediately available budget and effectively signifies 'debt' which limits its ability to manage the current wildfire disaster support.
As the 'large wildfire' continues into its seventh day in the Gyeongsang region, there have been not only forest damages but also casualties, including 28 deaths and 32 injuries (as of 8 p.m. the previous day). Inside the Ministry of Economy and Finance, there are assessments suggesting that after the wildfire suppression, they will need to compile a detailed report of the damages, but the scale may need to exceed the recovery costs of 417 billion won from the '2022 East Coast wildfires,' which was unprecedented.
In the political arena, the calls for the supplementary budget are growing due to the wildfire. In particular, such voices are intensifying primarily from the ruling camp. The wildfire damage clearly falls under the supplementary budget requirement of 'disaster.' Consequently, some are suggesting that a 'one-point' supplementary budget for wildfires may be possible. During Typhoon Rusa in 2002 and Typhoon Ewiniar in 2006, the government allocated 4.1 trillion won and 2.2 trillion won, respectively, as a one-point supplementary budget, and all of this money was used for disaster recovery.
Currently available budgets include approximately 20 billion won from the Korea Forest Service (excluding expenditures from disaster recovery projects incurred the previous year from a budget of 100 billion won), about 120 billion won from the Ministry of the Interior and Safety's disaster response fund (excluding support for the Jeju Air disaster from a budget of 360 billion won), and approximately 400 billion won from the purpose reserve fund (excluding prior allocations related to free education from a budget of 1.6 trillion won).
While the ruling party believes that the existing budget and reserve fund are tight and that a supplementary budget is urgent, the opposition argues that the debts from national treasury card exists and can serve as an alternative to the supplementary budget.
The debts from national treasury have been deployed during major disasters in the past. In simple terms, it functions as a type of government 'debt financing.' The debts from national treasury set out in Article 25 of the National Finance Act is a system that allows the government to incur debt without additional securing a budget in response to emergencies. The government enters into contracts for essential expenditures in advance, with the expenditures being accounted for in future budgets. Generally, debts from national treasury require prior specifications of the project and amount with the National Assembly's approval, but debts from national treasury for disaster recovery only need to incur within the approved limits.
The debts from national treasury have been activated during major disasters, such as ▲ Typhoon Rusa in 2002 ▲ the outbreak of foot-and-mouth disease in 2011 ▲ and the heavy rain disaster on the Korean Peninsula in 2020. This was due to the assessment that it was difficult to secure resources even with relevant budgets and reserve funds. In particular, during the flooding disaster in August 2020, there was considerable controversy over whether a 'supplementary budget (the fourth supplementary budget of that year)' was necessary like this situation, but this necessity was quelled when former Deputy Prime Minister Hong Nam-ki introduced the debts from national treasury. However, it was acknowledged that ultimately a fourth supplementary budget was executed to provide disaster relief funds for the coronavirus disease (COVID-19). It has been assessed that they prevented an early supplementary budget from being prepared through debts from national treasury. If the debts from national treasury are mobilized for this wildfire response, it would be the first time in five years.
On that day, Choi Sang-mok, Deputy Prime Minister and Minister of the Ministry of Economy and Finance, visited the wildfire damage site in Andong, North Gyeongsang Province, and stated, “The government will quickly review all measures it can take and will inform the people soon.”
Meanwhile, the Ministry of Economy and Finance is also concurrently working to examine what issues exist in the existing wildfire response system in addition to the recovery from this wildfire damage. An official from the Ministry of Economy and Finance noted, “We are focusing on identifying the equipment shortages, such as for wildfire suppression helicopters.”