South Korea on Tuesday proposed a supplementary budget worth 26.2 trillion won (about $17.1 billion) to ease the burden of rising energy prices on households and industries as the Middle east conflict has created a supply crunch.
About 10.1 trillion won will be aimed directly at “easing the burden of high oil prices,” according to a Google Translation of the budget document in Korean, while other measures included support for exporters and an increase in grants to local governments.
Minister of Planning and Budget Park Hong-geun wrote said that “swift fiscal support is necessary to alleviate the hardships facing the people’s livelihoods as soon as possible and to ensure that the spark of economic recovery, which the current administration has painstakingly revived, does not die out.”
Crude oil prices have spiked since the U.S. and Israel launched strikes on Iran on Feb. 28, as a supply crunch impacts Asian economies, particularly those excessively dependent on imports from the Middle East.
South Korea, Asia’s fourth-largest economy, imports 94% of its energy, according to a 2024 report from the Korea Energy Statistics Information Systems, and almost 72% of its crude oil comes from the Middle East.
At the heart of the 10.1 trillion won package is a 5 trillion won tranche for a petroleum price cap, which was announced by President Lee Jae Myung on March 9.
Seoul will also hand out a higher refunds for public transportation passes nationwide. The country will allocate 4.8 trillion won for consumer vouchers of between 100,000 won to 600,000 won per person, for the bottom 70% of the earners, depending on income and region.
Other measures in the relief package include fuel subsidies for farmers and fishermen, as well as for small-scale cargo ship operators.
About 9.7 trillion won will be used to boost grants for local governments.
This budget will be funded by tax revenue from the boom in chip exports and the stock market rally, Park said.
South Korean media reported the bill has been submitted to the National Assembly, and is expected to be supported by the opposition People Power Party. It is expected to be passed by April 10.
Source: CNBC