South Korea Proposes to Add Rp290 Trillion Budget to Overcome the Impact of the Middle East Conflict

South Korea (South Korea) - The South Korean government has proposed an additional budget of 26.2 trillion won (Rp. 290 trillion), partly to reduce the impact of rising fuel prices amid rising tensions in the Middle East.

The additional budget also includes the provision of cash assistance to about 70 percent of the population.

"A huge wave of crisis is rapidly approaching our economy, driven by a sharp increase in uncertainty at home and abroad due to rising tensions in the Middle East," South Korean Planning and Budget Minister Park Hong-keun said on Tuesday, March 31, reported by ANTARA from Yonhap.

According to a Yonhap news agency report, the proposal approved at the cabinet meeting focused on three main things, namely responding to high oil prices, stabilizing livelihoods, and minimizing industrial damage while securing supply chains, according to the South Korean Ministry of Planning and Budget.

Global oil prices have risen sharply as the Strait of Hormuz has been effectively closed since the US and Israeli attacks on Iran were carried out in late February to disrupt global oil supplies. South Korea is heavily reliant on imports for energy.

Minister Hong-keun explained that high oil prices and inflation put a heavier burden on vulnerable groups, including small business owners and the younger generation in South Korea.

The main component of the proposed additional budget is the provision of cash of 4.8 trillion won (Rp53.1 trillion) for the lowest 70 percent of the population, the ministry said.

Around 35.8 million South Koreans will receive around 100 thousand won (Rp1.1 million) and 600 thousand won (Rp6.6 million) per person, with payments differentiated based on income level, region, and whether the recipient lives in an area experiencing population decline.

The largest benefit of up to 600 thousand won (Rp6.6 million) per person will be given to basic life insurance recipients living in the Seoul metropolitan area.

Meanwhile, another 5.1 trillion won (Rp56.5 trillion) will be allocated to support the fuel price capping program and measures to address potential disruptions in the supply of naphtha, a key raw material used in the petrochemical industry and other industries.

Under the price-rationing system adopted in March, the South Korean government sets a maximum price for fuel products supplied by oil refineries to gas stations and retail distributors every two weeks, reflecting changes in international oil prices.

Of the additional budget of Rp56.5 trillion, as much as 87.7 billion won (Rp971.8 billion) of which will be used to increase the rate of reimbursement of public transportation costs by 30 percent for six months, as a follow-up to the five-day mandatory vehicle rotation system.

The South Korean government has imposed a vehicle restriction system in the public sector, while encouraging voluntary participation from the private sector and promoting the use of public transportation.

The ministry said another 9.7 trillion won ($8.5 billion) will be used to significantly strengthen local governments' finances.

Other spending includes 1.9 trillion won (Rp21 trillion) for youth entrepreneurship and employment support, 500 billion won (Rp5.5 trillion) for renewable energy transition, and 700 billion won (Rp7.7 trillion) for supply chain stabilization.

The additional budget was proposed without issuing additional bonds, using 25.2 trillion won (Rp279 trillion) from tax revenue and 1 trillion won (Rp11 trillion) from public funds.

"This additional tax revenue comes from the strong economic growth achieved under the current government, including the high semiconductor sector and strong stock market performance," said Minister Hong-keun.

Opposition parties have also agreed to pass the draft additional budget bill in a plenary session scheduled for Friday (3/4).