Finance minister reaffirms opposition to providing universal COVID-19 aid

All News 14:44 June 25, 2021

SEOUL, June 25 (Yonhap) -- South Korea's top economic policymaker reaffirmed Friday that he is opposed to the idea of providing universal relief handouts to all people with another extra budget currently under review.

The government is planning to create this year's second extra budget, estimated at around 30 trillion won (US$26.6 billion), which will be funded with excess tax revenue, as it seeks to underpin an economic recovery and support vulnerable people hit hard by the COVID-19 pandemic.

"It is not appropriate for the government to provide emergency aid to wealthy people in light of the country's economic and financial situations," Finance Minister Hong Nam-ki told a parliamentary meeting.

This computerized image shows South Korea's plan to create this year's second extra budget to support vulnerable people hit hard by the pandemic. (Yonhap)

The ruling Democratic Party (DP) wants to offer another round of universal stimulus checks for all households in a bid to boost domestic demand.

But the finance ministry has voiced opposition to the idea, citing the country's snowballing national debt. The government is seeking to provide support to the bottom 70 percent of the income bracket.

In March last year, the country offered 14.3 trillion won in one-off emergency cash handouts to all households. The government has so far provided three rounds of targeted support to smaller merchants and vulnerable groups.

The government is looking at the option of providing tailored support for merchants and the self-employed, and cash back rewards for credit card spending with the supplementary budget.

South Korea created an extra budget of 14.9 trillion won in March to finance the 20.7 trillion-won relief aid for smaller merchants and vulnerable people hit hard by the pandemic.

Meanwhile, the minister said fiscal and monetary policies have their own policy goals, shrugging off concerns that the creation of another extra budget is not in sync with the central bank's move toward tightening its easing policies.

Bank of Korea (BOK) Lee Ju-yeol said Thursday his bank is ready to raise the key interest rate "within this year," stressing the need to orderly normalize its monetary policy amid the accelerating economic recovery.

In May, the BOK froze its policy rate at a record low of 0.5 percent. The central bank slashed the base rate by a combined 0.75 percentage point between March and May 2020 to bolster the pandemic-hit economy.