President Lee Jae-myung, at a senior secretaries' meeting on the 12th, ordered the formation of a supplementary budget in response to the Middle East situation and said, "Even if we provide direct support (to some groups to ease the burden of high oil prices), I think there could be a double effect if, rather than cash, we pay it in the form of local currency so the entire amount is converted into sales for small merchants and local business districts."
Local currency, also called "local love gift certificates," is an alternative currency such as vouchers or cards issued by local governments and usable only at affiliated stores in those jurisdictions. Currently, 80% of local governments nationwide operate local currency programs. This year, with central government funding support, 29 trillion won will be issued, the largest ever.
Lee has openly called local currency a signature policy. Starting with the introduction of "Seongnam Love Gift Certificates" when serving as Seongnam mayor, he issued "Gyeonggi Local Currency" as Gyeonggi governor. The inclusion of local currency funding in the first and second supplementary budgets last year also reflected Lee's intent.
◇ "Gas stations with more than 3 billion won in annual sales cannot be local currency merchants"
However, there are concerns that providing direct support via local currency to ease the burden of high oil prices presents several problems. The biggest issue for now is that local currency cannot be used at most gas stations. That is because of operating guidelines from the Ministry of the Interior and Safety that bar stores with annual sales of 3 billion won or more from registering as local currency merchants. A government official said, "Unless a gas station is very small and on the outskirts, most gas stations exceed 3 billion won in annual sales and cannot register as merchants."
Some local governments are also voicing this problem. The Asan mayor in South Chungcheong Province recently said at the South Chungcheong Mayors and County Governors Council, "Gas stations are a foundational industry directly tied to the livelihoods of the self-employed, farmers, and logistics workers," adding, "Restricting local currency use based solely on annual sales overlooks the public-goods nature of fuel, a daily necessity."
Still, it is not easy to dismantle this standard. Because the purpose of local currency is to boost sales for neighborhood business districts and small merchants in the area, the interests intertwined here are complex. A government official said, "If we loosen the annual sales rule, there is pushback that small shops will go under," adding, "We also have to consider the overarching principle of protecting small merchants."
◇ "It is a 'high oil price measure,' but it could spur spending in unrelated sectors"
Another issue is that, apart from excluding gambling and nightlife businesses, local currency has virtually no restrictions on where it can be spent. The government's policy goal is to ease the burden from "high oil prices," but money could be spent in unrelated areas separate from that support.
Local currency is likely to be used mainly at restaurants or supermarkets. The top industries by spending for consumption coupons last year were ▲general restaurants (40.3%) ▲supermarkets and groceries (16%) ▲convenience stores (10.8%) ▲hospitals and pharmacies (8.8%) ▲private academies (3.7%) ▲apparel and accessories (3.6%). In the case of the 2020 emergency disaster relief funds, the largest spending went to ▲restaurants (24.8%) ▲supermarkets and grocery stores (22.2%) ▲hospitals and pharmacies (10.4%).
As a result, there are concerns that stimulating consumption through local currency could only stoke inflation. Kim Yong-beom, the Blue House policy chief, also said, "Because oil prices have a large weight in consumer prices, focusing on direct support rather than cutting the fuel tax could be negative for price management."
On the 13th, the government began work on drafting the supplementary budget while also reviewing how to use local currency. A government official said, "We are examining whether we should activate local currency through the supplementary budget so money circulates better in the regions, or whether, for specific programs such as energy vouchers, we should make local currency the only payment method."