South Korea prepares Rp290 trillion when oil prices rise, 35.8 million people receive assistance

JAKARTA - The South Korean government has proposed an additional budget of 26.2 trillion won or around Rp. 291 trillion at an exchange rate of Rp. 11.08 per won, to withstand economic shocks due to soaring energy prices amid the heating up of the Middle East conflict. According to Kyodo News quoted Tuesday, March 31, the large funds will also be used for cash assistance for about 70 percent of the population.

The proposal approved by the cabinet on Tuesday focuses on three things, namely mitigating the impact of oil prices, maintaining the livelihoods of residents, and containing industrial damage while securing supply chains. Budget Minister Park Hong-keun said tensions in the Middle East had increased uncertainty and pressured South Korea's economy.

"A major crisis wave is moving quickly toward our economy, driven by a sharp spike in uncertainty at home and abroad due to rising tensions in the Middle East," Budget Minister Park Hong-keun told reporters, as quoted by Kyodo News.

Still according to the Kyodo News report, the most prominent component is a cash assistance of 4.8 trillion won for the bottom 70 percent of income groups. About 35.8 million people will receive 100,000 won to 600,000 won per person, depending on income level, region of residence, and whether they live in an area experiencing population shrinkage. The largest assistance is given to basic life security recipients outside the Seoul metropolitan area.

The government has also prepared 5.1 trillion won to support the fuel price cap program and anticipate disruptions in the supply of naphtha, an important raw material for the petrochemical industry. Of that amount, 87.7 billion won was used to temporarily raise the level of public transportation costs to 30 percentage points for six months. This policy is a continuation of the five-day vehicle use restrictions that have been implemented in the public sector.

An additional 9.7 trillion won will be disbursed to local governments. Other spending includes 1.9 trillion won for entrepreneurship and job support for young people, 500 billion won for renewable energy transition, and 700 billion won for supply chain stabilization.

The additional budget will be financed without issuing new bonds. The funds come from additional tax revenue and public funds. The budget bill is scheduled to be passed in the plenary session next Friday.