Concerns rise over ‘super supplementary budget’ as national debt grows

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Concerns rise over ‘super supplementary budget’ as national debt grows

Published: 20 Jun. 2025, 00:00

Audio report: written by reporters, read by AI

People shop at Mangwon Market in Mapo District, western Seoul, on June 19, the same day the Korean government approved a 30.5 trillion won supplementary budget. [NEWS1]

The Korean government approved a 30.5 trillion won ($22.15 billion) supplementary budget on June 19 aimed at boosting the economy and easing the cost-of-living burden. This marks the Lee Jae Myung administration’s first extra budget and the second of the year. It includes 20.2 trillion won in increased spending and 10.3 trillion won in adjusted revenue projections, reflecting reduced tax collection. When combined with the 13.8 trillion won first supplementary budget announced in May, the fiscal expansion amounts to what many are calling a “super budget.”

The centerpiece of the second budget is a universal “household recovery voucher” program. Every Korean citizen will receive 150,000 won, with additional support provided to lower-income groups and residents in depopulated areas. The package also includes a debt relief program for small business owners and the self-employed. Debts under 50 million won that have been delinquent for over seven years will be eligible for reduction or rescheduling based on the borrower’s ability to pay.

Lee defended the move, saying that while fiscal soundness is important, the current economic slump necessitates government intervention. “This is the time to use national finances,” he said. With growth projected to hover near zero and domestic demand remaining sluggish, the government sees a fiscal stimulus as a necessary response.

Still, concerns persist. Cash handouts are often less effective than public investment in stimulating the economy. Skepticism remains over whether the 13.2 trillion won allocated to direct support will actually serve as a growth catalyst. The effectiveness of providing the same amount to all citizens, including high-income earners, is also being questioned.

There are inflationary risks, too. Injecting large amounts of cash into the market could heat up consumer prices and further fuel volatility in the real estate sector. Meanwhile, public debt is rising sharply. Following the first supplementary budget, national debt rose to 1.28 quadrillion won. With the second budget to be financed in part through 19.8 trillion won in new bond issuance, the debt is expected to surpass 1.300 quadrillion won. Tax revenue shortfalls totaling 87 trillion won over the past two years only deepen the concern.

President Lee Jae Myung, right, speaks during a Cabinet meeting at the presidential office in Yongsan District, central Seoul on June 10. [NEWS1]

Debt relief for individuals also raises fairness issues. While it is essential to manage the upcoming 47 trillion won in maturing pandemic-era loans this September, repeated write-offs could trigger moral hazard and frustrate borrowers who have been repaying responsibly.

Korea’s economy is facing long-term structural challenges such as low birthrates and population aging. One-time cash distributions may ease short-term pain, but they are no substitute for deeper reforms. To ensure that the extra budget translates into lasting growth, it must be accompanied by structural reform efforts that improve the economy’s fundamentals. Safeguarding fiscal integrity and reassessing tax cuts will also be essential to avoid turning the budget into a populist giveaway.

Translated from the JoongAng Ilbo using generative AI and edited by Korea JoongAng Daily staff.