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Parliament passes $23B supplementary budget to revitalize economy, noncapital areas

Published: 05 Jul. 2025, 00:00

Lawmakers enter the main chamber of the National Assembly in Yeouido, western Seoul, on July 4. [NEWS1]

The National Assembly approved a supplementary budget totaling 31.8 trillion won ($23.32 billion). The initial government proposal was for 30.5 trillion won, but an additional 1.5 trillion won was added to increase support for initiatives such as consumer vouchers aimed at revitalizing the economy in noncapital and depopulated regions.

The second supplementary budget was passed during a plenary session of the National Assembly on Friday. Of the finalized 31.8 trillion won, 10.3 trillion won was allocated to adjust revenue projections based on tax revenue fluctuations.

During deliberations, lawmakers raised the central government’s subsidy rate for the consumer coupon program by 5 to 10 percentage points and increased support for noncapital areas and regions experiencing population decline. These additions amounted to 2.4 trillion won in total.

Under the finalized budget, the amount of consumer coupon support will differ by region. An additional 30,000 won will be provided to residents of noncapital areas, while the subsidy for depopulated rural and fishing regions will rise from the initially proposed 20,000 won to 50,000 won.

As a result, basic livelihood recipients living in these areas will receive up to 550,000 won in coupons, up from 520,000 won. The additional support will be included in the first round of disbursements.

As for whether foreigners will be eligible for the vouchers, it will be determined by a task force team formed under the Ministry of the Interior and Safety, a Ministry of Economy and Finance official told the Korea JoongAng Daily.

Funding of 42.6 billion won was added for designing and testing a “physical AI” leading model aimed at securing global technological leadership.

Other budget additions include 6 billion won for high-voltage transmission technology to accelerate the construction of an energy expressway on the west coast, 24.9 billion won for care services for people with developmental disabilities and 113.1 billion won to increase child care subsidies for infants up to the age of 2 by 5 percent.

Support for the agricultural and fisheries sectors also received a boost. A total of 102.1 billion won was allocated to stockpile an additional 20,000 tons of domestically grown soybeans by the end of the year. Another 2 billion won was earmarked for expanding equipment such as oxygen suppliers and shading systems to cope with abnormal sea temperatures.

Additionally, 300 billion won in policy loans — capped at 500 million won per borrower at an interest rate of 1.5 percent — will be made available for young farmers.

The supplementary budget also includes measures to strengthen wildfire response capabilities.

A total of 15.9 billion won was set aside to lease three large forest helicopters with 30,000-liter (7,925-gallon) water tanks, and 10.4 billion won will be provided to fund alternative crop production facilities for pine mushroom farmers affected by wildfires.

While the budget expands support in many areas, it also includes reductions.

Considering the private sector’s capacity to invest, 160 billion won was cut from three programs. Another 7.4 billion won was trimmed from three official development assistance projects in response to shifting conditions in recipient countries. In total, 1.1 trillion won was cut from various areas.

The National Assembly building in western Seoul on June 4 [YONHAP]

The supplementary budget will inevitably increase the fiscal burden on the state.

The additional 1.3 trillion won required for expanded programs will be financed through the issuance of new government bonds, effectively increasing the national debt. As a result, total government spending will rise from 656.5 trillion won to 703.3 trillion won, up 7.1 percent year-on-year.

The managed fiscal deficit is expected to expand from -3.3 percent to -4.2 percent of GDP, and the national debt-to-GDP ratio is projected to rise from 48.4 percent to 49.1 percent. Some analysts warn that this influx of money could increase inflationary pressure.

“While there is some justification for the supplementary budget to boost domestic demand, the fact that most of the funding is allocated to one-off spending items could dilute the policy’s effectiveness,” said Kim Jung-sik, professor emeritus of economics at Yonsei University.

The government plans to accelerate budget execution given the ongoing economic slump. It will hold a Cabinet meeting on Saturday to approve the National Assembly’s additions and finalize budget allocation plans.

The first round of consumer coupon distribution, targeting the entire population, is scheduled to take place later this month. A second round will follow within two months, offering an additional 100,000 won to all but the top 10 percent of income earners, pending a task force review by relevant ministries.

A survey of local governments will be conducted in August to assess demand for regional gift certificates.

Starting with the September issuance, the government subsidy rate and consumer discount rates will be raised.

The discount rate will increase to 10 percent in the capital region, 13 percent in noncapital areas and up to 15 percent in depopulated regions.

For financially vulnerable borrowers, the government plans to create a dedicated debt adjustment unit within the Korea Asset Management Corporation, purchase long-delinquent loans before the year’s end and expand the support scope by September.

Translated from the JoongAng Ilbo using generative AI and edited by Korea JoongAng Daily staff.
BY KIM YEON-JOO [[email protected]]