South Korea drafts $46bn budget to help COVID-hit businesses

South Korea unveiled plans on Thursday to pay more than $20bn to small businesses and self-employed people to make up for losses due to COVID restrictions.

The first supplementary budget since President Yoon Suk-yeol took office this week is scaled at 59.4 trillion won ($46bn), but 23 trillion won ($18bn) will be paid to provincial governments, the finance ministry said.

The ministry said in a statement it would not issue any bonds to fund the budget as this year’s tax revenue projection is revised up by a sharp 53.3 trillion won ($41bn) and another 7 trillion won ($5.4bn) worth of existing spending plans would be changed.

It said 26.3 trillion won ($20.4bn) would be paid to some 3.7 million smaller businesses and self-employed people hit by various COVID-related curbs, and another 6.1 trillion won ($4.7bn) would be used to strengthen the country’s medical capabilities.

The remainder will be spent on strengthening welfare programmes.

Separately, the ministry said it would spend 9 trillion won ($7bn) repaying government bonds ahead of maturity, cutting this year’s planned issuance or a mix of both.

Yoon had promised a 50 trillion won ($38.7bn) package during his election campaign, but the government of then-President Moon Jae-in already introduced a 16.9 trillion won ($13bn) supplementary budget before the May 9 election.

The supplementary budget would increase this year’s total government spending by 52.4 trillion won ($40.6bn) to a record 676.7 trillion won ($524.3bn), a smaller increase than the increased tax revenue due to a debt reduction plan.

Despite the increased spending, this year’s government debt would be reduced to 49.6 percent of annual gross domestic product from 50.1 percent seen previously, the ministry added.

The supplementary budget bill is due to be submitted to the parliament for approval on Friday.