 |
| Ruling Democratic Party of Korea presidential candidate Lee Jae-myung speaks after offering flowers at the statue of the late POSCO founder Park Tae-joon in Pohang, North Gyeongsang Province, Monday. Yonhap |
By Nam Hyun-woo
Rival candidates are making bold pledges to provide 100 trillion won ($84.5 billion) in COVID-19 economic relief for the public, but the money-spreading pledges are drawing criticisms for lacking a clear vision of where the money needed will come from.
According to each camp, ruling Democratic Party of Korea (DPK) presidential candidate Lee Jae-myung and main opposition People Power Party (PPP) candidate Yoon Suk-yeol are both endorsing an increase in the amount of COVID-19 economic relief to the public.
Lee said on Monday that he “welcomes” the PPP’s idea of providing 100 trillion won in relief funds.
“When I first proposed 25 trillion won, the opposition ardently criticized it. Then, Yoon came up with 50 trillion won and Kim Chong-in promised 100 trillion won,” Lee said. Kim Chong-in is head of the PPP’s election committee, the top aide position for Yoon.
“If the ruling and opposition parties reach a bipartisan agreement and urge the government to allocate an extra budget (for the relief fund), what else will the Moon Jae-in government say?” Lee said, adding 100 trillion won is “not a lot of money.”
Lee added that the DPK will accept the PPP’s offer, but on the condition that they should table this agenda at the National Assembly within December, threatening that if the PPP does not accept his proposal it would be held “responsible for political deceptions.”
 |
| People Power Party presidential election committee head Kim Chong-in, center, attends a committee meeting at the National Assembly on Yeouido in Seoul, Monday. Joint Press Corps |
Last week, Kim told Chosun Ilbo newspaper, “Candidate Yoon pledged 50 trillion won, but it won’t be enough. … 100 trillion won should be considered when Yoon takes office.”
But Kim’s plans for securing the amount, which accounts for approximately one-sixth of Korea’s entire state budget for next year, are drawing doubts on their feasibility.
Kim said the Yoon government would finance the 100 trillion won fund by “restructuring the budgets of ministries and other government agencies.”
“Korea’s total budget for next year is 607 trillion won, and if each ministry and government agency cuts their respective budget by 10 percent, we would have 60 trillion won,” Kim said. “If that isn’t enough, we should issue treasury bonds or other government bonds to secure 100 trillion won and use the fund to compensate the people for economic losses from the COVID-19 pandemic.”
Kim’s plans, however, drew criticism from government officials for being unrealistic, as an expenditure cut can be put into effect about six or seven months into a fiscal year, after giving time to determine if the policy in action is effective.
Adding to Kim’s idea, Won Hee-ryong, head of policy at Yoon’s camp, said that the PPP is not advocating 100 trillion won while “burdening the state coffers by issuing government bonds,” adding that the amount can be reached if the government taps into the tax revenue surplus from this year.
However, Myongji University professor Woo Seok-jin said in a radio interview with broadcaster MBC that most of the surplus was spent while increasing the budget this summer and the remainder appears to add up to about 6 trillion won.
“Even if we somehow come up with 50 trillion won (through rearranging expenses), more than 40 trillion won has to be secured by issuing government bonds,” Woo said. “We should think about whether or not this is possible.”
DPK candidate Lee’s stance is also increasing national spending, even if the government may have to see a significant increase in the ratio of national debt to GDP.
“Are we going to have a problem if the country’s national debt ratio surpasses 100 percent? The answer is no,” Lee said on Dec. 6. “The Ministry of Economy and Finance should spend money to help the public.”
If Korea sticks to its spending plan for next year, the country’s debt-to-GDP ratio will stand at 50 percent. This is way lower than that other advanced economies ― such as the U.S. with 129 percent or Japan with 254 percent last year ― but experts raise concerns over the pace of increase.
Even if Korea does not apply a supplementary budget next year, the country’s outstanding national debt will reach 1,064.4 trillion won, up 404.2 trillion won from 660.2 trillion won in 2017 when President Moon took office. During the previous Park Geun-hye and Lee Myung-bak administrations, the debt grew 170.4 trillion won and 180.8 trillion won, respectively.
If a huge chunk of government bonds is infused in the market, it will expand uncertainties, which may trigger a sharp interest hike. In a long-term view, it may also pose a negative impact to Korea’s credit rating. In May this year, Moody’s said: “South Korea’s long track record of fiscal discipline is expected to be put to the test, as its record-high government debt will likely increase further amid the country’s expansionary fiscal policy.”
“Korea’s state pension programs are not accounted for in the country’s national debt. When we add that spending into the calculation, a 50 percent debt ratio is tantamount to 90 percent or higher,” said Hong Sung-gul, a professor at Kookmin University’s Department of Public Administration.
“Though politicians talk about 100 trillion won as if it is nothing, the country has to pay 20 trillion won in interest alone next year,” Hong said. “If the country’s debt ratio goes up, its credit rating will be downgraded, which will affect its trade as the interest rates will go up for the money Korea borrows from overseas entities.”
Rival candidates’ W100 tril. COVID relief pledges look unrealistic
Source: Buhay Kapa PH
0 Comments