A 26.2 trillion won supplementary budget proposal to cushion the shock of soaring oil prices from the prolonged Middle East war passed the National Assembly Special Committee on Budget & Accounts on the 10th. The ruling and opposition parties reached a last-minute deal to keep the total expenditure at the government's original level while offsetting cuts and increases across detailed programs.
The budget for compensation to those hit by high oil prices, the core of this extra budget, was also reflected as the government proposed. If the package clears the plenary session, about 32.56 million people in the bottom 70% by income will receive between 100,000 won and 600,000 won per person on a sliding scale. The People Power Party initially criticized this as a cash handout ahead of the election and demanded cuts, but in the final stretch of talks it shifted to acceptance in light of the need to respond to livelihoods.
Some complementary measures to ease living costs from rising oil prices were further strengthened. Funding to temporarily discount K-Pass, a public transit rebate service, by 50% increased by 100 billion won from the government plan, and the budget to stabilize naphtha supply was raised by 200 billion won. The extra budget also includes launching oil price-linked subsidies for agricultural machinery, expanding subsidies for tax-free diesel for those in agriculture, forestry and fisheries, easing fuel costs for coastal passenger ships, and expanding support for chemical fertilizers.
By contrast, some programs of a short-term job-creation nature became targets for adjustment. During the review, the ruling and opposition parties clashed sharply over cash-like support and industry and culture items, but the package was wrapped up by capping the aggregates rather than reflecting all large-scale increase requests raised in standing committees and the budget panel. A project linking China-origin charter flights to Korean regional tourism products was also partially revised.
The deal was reportedly sealed by bringing in the floor leaders and the budget panel secretaries directly after working-level talks in the budget panel's sub-subcommittee hit turbulence. The decision by the ruling and opposition parties not to raise the aggregates of the extra budget is seen as reflecting concerns about fiscal soundness. The financing for this extra budget comes from 25.2 trillion won in excess tax revenue, including corporate tax, and 1 trillion won from funds, and the government and political circles are even describing it as a "debt-free extra budget."
On fiscal indicators, the deficit is also expected to narrow slightly. With Government Bonds redemption included, the consolidated fiscal balance without social security fund deficit ratio to gross domestic product is set to fall from 3.9% to 3.8%, and government debt is forecast to decrease by 1 trillion won from the main budget. Observers say it is a compromise that considers both responding to the economy and maintaining fiscal stability.
Following the budget panel's vote, the ruling and opposition parties plan to open a plenary session the same day to finalize the extra budget. The package focuses on reducing the impact on livelihoods from high oil prices, rising logistics costs, and raw material supply instability, and on easing burdens for vulnerable groups and in the transport and agriculture and fisheries sectors.