South Korean President Lee Jae Myung stressed a pressing need to stimulate the national economy. - Reuters
SEOUL: President Lee Jae Myung convened a Cabinet meeting on June 19 and approved a 15.2 trillion won (US$0.011 trillion) budget allocation for a handout of cash-equivalent vouchers to all South Koreans to boost consumption amid growing recession fears.
The move came just hours after Lee returned from a three-day trip to Canada.
The liberal president reviewed the spending package, which the government says is aimed at reviving the sluggish consumer demand that has left many small business owners on the brink of collapse.
“Now is the time to use the state budget, given the gravity of the pain ordinary people are suffering,” Lee said during the meeting.
Stressing a pressing need to stimulate the national economy, Lee said, “If you spend money for some reason, I think the benefits should at least be enjoyed fairly by the people.”
The one-off universal cash-equivalent payout will amount to at least 150,000 won to all South Koreans.
Those who cannot afford basic living expenses due to extreme poverty and inability to get a job would be eligible for 400,000 won, while those categorised as “near poor” in South Korea will receive 300,000 won.
In addition to the above, people in the bottom 90 per cent of the income bracket will each receive an additional 100,000 won.
Second Vice-Finance Minister Lim Ki-keun estimated some 13 trillion won in consumption was anticipated.
However, Seoul’s move to dole out a universal cash handout to all South Koreans regardless of age, gender and income level has triggered criticism.
Ho Jun-seok, spokesperson of the conservative opposition People Power Party, said in a statement on June 19 that the cash handout scheme “sparks criticism that Lee was rewarding (voters) for the election victory”.
He also expressed concerns that such a universal payout scheme could lead to the birth of populism in South Korea.
“A supplementary budget to boost the economy would be necessary, but it is uncertain that spreading money to people could lead to an economic rebound,” he said.
In 2020, as South Korea was hit hard by the Covid-19 pandemic, former liberal president Moon Jae-in’s administration extended cash coupons to households to shore up domestic consumption, starting in May 2020.
However, not everyone was subject to the payout scheme. Only those who belonged to the bottom 70 per cent of the income bracket were eligible for the state subsidies.
Back then, a household of four people or more was eligible for one million won for all household members combined, while three-person households received an 800,000 won payout. Single-person households received 400,000 won in support and two-person households got 600,000 won.
The Moon administration later in September rolled out an additional batch of vouchers for freelancers, family with non-adults and small business owners, among others.
Asked whether the scheme would cover foreign nationals in Korea, a Finance Ministry official said: “Foreigners are not currently included, but exceptions could be made through task force discussions. The specific recipients will be finalised through those discussions.”
About a decade ago, Lee, as the mayor of Seongnam in Gyeonggi Province, sought to introduce plans to offer school uniforms to students for free, install a facility for free postpartum care services and introduce a basic income for young people.
Such plans hit a snag as Gyeonggi province opposed Seongnam’s plan, and the litigation had been ongoing until Lee was elected the governor of Gyeonggi Province in 2019.
As the chair of the then-main opposition party while disgraced former President Yoon Suk Yeol was incumbent, Lee led a 13 trillion won proposal to allow all citizens to receive 250,000 won in August 2024 despite government opposition. The Bill was then vetoed by Yoon, and Parliament was unable to override the presidential veto.
The budget proposal on June 19, as part of the 30.5 trillion won supplementary budget, will be submitted to the National Assembly for final approval on June 23.
A day before, Lee is scheduled to hold talks with leaders of major parties, including Kim Byung-kee, floor leader of the ruling Democratic Party of Korea; Kim Yong-tae, interim leader of the main opposition People Power Party and its whip Song Eon-seog, at his official residence in Yongsan-gu, Seoul, according to his senior political secretary Woo Sang-ho on June 19.
A budget Bill requires at least half of the votes of lawmakers present at the plenary session to be passed, while at least half of all lawmakers must be present at the voting session.
Out of all 298 lawmakers, 167 are members of the ruling Democratic Party.
South Korea’s 2025 annual budget was confirmed to be 673.3 trillion won in December.
Upon parliamentary approval, the extra budget spending package would follow a 13.8 trillion won budget scheme aimed at supporting regions affected by massive wildfires in March and tackling uncertainties posed by US tariff threats.
The Bill gained Cabinet approval in mid-April and the parliamentary green light in early May. - The Korea Herald/ANN
