Seoul: The ruling Democratic Party (DP) and the government have reached an agreement to present an extra budget bill to the National Assembly next Tuesday, as announced by the budget minister on Thursday. This move aims to mitigate the economic repercussions on vulnerable sectors due to the ongoing conflict in the Middle East.
According to Yonhap News Agency, the proposed extra budget bill is designed to alleviate the burden of escalating oil prices and provide support to small and medium-sized enterprises, as well as vulnerable households affected by the prolonged conflict. Budget Minister Park Hong-keun emphasized the government's commitment to reducing the financial strain on citizens by implementing an oil price cap system to stabilize domestic fuel prices.
The supplementary budget will also cover compensations for potential financial losses faced by oil refineries due to the price cap system, which imposes maximum prices on oil products supplied to gas stations and distributors. Additionally, the government plans to extend support to low-income households, small business owners, and the youth, aiming to address welfare service gaps and ensure their daily lives remain unaffected by the rising oil prices and inflation resulting from the Middle Eastern conflict.
The budget will further focus on supporting industries impacted by the crisis, with measures to stabilize supply chains and promote energy transition efforts. It includes provisions for expanding oil reserves and ensuring the stable supply of critical resources like naphtha, rare earth elements, and urea. South Korea is currently facing naphtha shortages, a crucial component for the petrochemical industry, exacerbated by the closure of the Strait of Hormuz amid regional tensions.
Moreover, the government intends to use the extra budget to encourage the adoption of renewable energy systems, such as solar power, in households to decrease long-term reliance on fossil fuels. However, the main opposition People Power Party has suggested delaying the budget review until mid-April, a proposal criticized by DP floor leader Han Byung-do, who insists on an expedited review process to avoid missing a critical response period.
President Lee Jae Myung has also urged the government to promptly draft a supplementary budget that focuses on stabilizing the domestic economy, reducing the impact on affected industries, and ensuring resilient supply chains.