Time to be smart with moneyThe government has decided to hand out disaster relief to about 14 million households, or 70 percent of the population. The Finance Ministry proposed 10 million households, but the ruling party demanded more. A family of four will receive a maximum of 1 million won ($815). The funds will require an additional budget of 9.1 trillion won. The government plans to submit a second supplementary budget bill for legislative approval after the April 15 general elections.
Emergency aid is needed as the economy has come to a standstill due to the coronavirus outbreak. Shop owners sit idly with few customers, part-timers are out of jobs and many cannot make a living. But whether the payment scope is appropriate is debatable. The 70 percent includes those who make 7.12 million won a month or 85 million won per year.
The money going to those families will not help their livelihoods or encourage spending. The ruling party may have argued for the increase in the hopes that it will benefit them in the April election.
The execution process also can stir controversy. Rich local governments have been coming up with their own relief aids. Pocheon, Gyeonggi, will dole out 500,000 won to each citizen. But other regions can hardly afford cash payouts. The central government’s financing plan does not consider such regional imbalances.
It is uncertain how long the virus disaster will go on. The Covid-19 outbreak is raging in North America and Europe.
The U.S. National Institute of Allergy and Infectious Diseases has warned that 100,000 to 200,000 Americans could die from the virus. Even after the outbreak is subdued, the toll on the economy will last longer.
If the crisis drags out, the relief funds will not be enough. More state funding will be required. The government cannot go on issuing debt to raise more funds. A supply glut can push prices for both government and corporate bonds, burdening the deficit account for both public and private sectors. The president claims budgetary spending will be streamlined to dole out more relief funds. But the budget should be readjusted to be ready for rainy days.
The government has stalled in deciding on the relief funds. The regional wealth gap has been highlighted because richer local governments went ahead with their own financing plans. The government must keep a record of the entire disaster administration process so as not to make similar mistakes in the future.