Budget deficit, national debt increased thanks to the supplementary budget

SEJONG – South Korea’s national debt and national debt per capita are likely to hit record highs of 1,075.7 trillion won ($901.6 billion) and 20.83 million won, respectively, following the recent additional budget encouraged by the government, with public funds worsening the budget deficit.

The supplementary budget budget deficit will widen to 68.1 trillion won, compared to the government’s earlier estimate of 54.1 trillion won under the 2022 regular budget.

On Friday, the Cabinet approved the supplementary budget worth 14 trillion won, most of which will be used to support freelancers and micro-business owners. The finance bill will be proposed to the National Assembly next Thursday.

The Ministry of Finance said 3 million won will be paid to each of the 3.2 million self-employed and micro-business owners, who have suffered a drop in sales due to COVID-19, when the Assembly passes The law project. The bill follows previous installments of 1 million won in December 2021.

Although this is an action to provide relief in terms of the financial situation of people in the midst of the pandemic, a main problem is that the supplementary budget could possibly undermine the fiscal strength of the nation.

Many Koreans believed the budget would come from excess state tax revenue in 2021, for which a 30 trillion won excess in taxes would have been collected over the government’s previous estimate.

But the government is not allowed to use excess tax revenue until the report on the nation’s accounts for the financial year 2021 is confirmed in April 2022.

Instead, it was found that the creation of the supplementary budget is to be supported by the upcoming government bond issuance worth 11.3 trillion won, which will add to the budget deficit, according to the data. of the Ministry of Finance.

The 14 trillion won for the supplementary budget will also come from public capital management funds worth 2.7 trillion won in addition to government-issued bonds of 11.3 trillion won, the ministry said in a statement. communicated.

Under the program, the budget deficit will be increased to 68.1 trillion won – government revenue of 553.6 trillion won versus government expenditure of 621.7 trillion won. Under the regular budget for 2022, the deficit is estimated at 54.1 trillion won.

Under this situation, the national debt will hit a record high of 1.075.7 trillion won, with the national debt-to-gross domestic product ratio reaching 50.1%.

Considering the population of 51.638 million in December 2021, the national debt per capita will show 20.831 million won. Under the national debt of 965.3 trillion won last year, the per capita debt was 18.693 million won based on the same population.

At a press conference on the same day, Deputy Prime Minister and Finance Minister Hong Nam-ki said he expects a certain part of the national debt to be repaid with excess tax revenue. scheduled for April. But he said about 40% of excess tax revenue will go to local government budgets.

Asked if the extra budget could stoke inflationary pressures, Hong said “the direct impact on consumer prices should be limited.” But he suggested that concerns about consumer prices may be greater if the budget volume exceeds 14 trillion won.

Some ruling party lawmakers continued to call on the government to increase the size of the supplementary budget to 20,000,000,000,000,000,000,000 won.

Although the minister rejected the request at this stage, he said the government would have the opportunity to discuss with lawmakers once the bill is proposed.

Concerns are growing that the supplementary budget could be a factor in accelerating the timing of interest rate hikes by the Bank of Korea amid continued volatility in consumer prices.

By Kim Yon-se ([email protected])

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