(EDITORIAL from Korea Herald on April 2) | Yonhap News Agency

## Summary
OK Costly response Supplementary budget risks stoking inflation, undermining fiscal discipline The Lee Jae Myung administration has submitted a 26.2 trillion won ($17.5 billion) supplementary budget to the National Assembly. At a time when prices are already rising and downward pressure on the Korean won is intensifying, an additional injection of liquidity into the market could further fuel inflation. The government is seeking to allay concerns about stoking inflation by stressing that the supplementary budget will be financed entirely through excess tax revenue, without issuing government bonds. Including the supplementary budget, total spending will top 753 trillion won.

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OK
Costly response
Supplementary budget risks stoking inflation, undermining fiscal discipline
The Lee Jae Myung administration has submitted a 26.2 trillion won ($17.5 billion) supplementary budget to the National Assembly.
The supplementary budget is, to some extent, unavoidable, as the fallout from the Middle East conflict spreads and global oil prices climb above $100 a barrel.
Even so, the principle of protecting fiscal soundness by targeting spending to essential areas must be upheld. There is reason to question whether the supplementary budget meets this principle.
It focuses on three areas: easing the burden of high oil prices, supporting livelihoods, and stabilizing industry and supply chains.
The headline measure — cash handouts — will see 100,000 won to 600,000 won per person paid to the bottom 70 percent of income earners, about 35.8 million people. The plan will cost 4.8 trillion won.
This could reportedly result in even households with annual incomes above 100 million won receiving the cash payouts. It is difficult to characterize this as support for the economically vulnerable.
The government says the supplementary budget is above all aimed at easing cost-of-living pressures, pointing to measures such as a price cap at gas stations and expanded discounts on agricultural, livestock and fishery products.
However, it is questionable whether injecting money to ease price pressures is an appropriate measure. At a time when prices are already rising and downward pressure on the Korean won is intensifying, an additional injection of liquidity into the market could further fuel inflation.
The government is seeking to allay concerns about stoking inflation by stressing that the supplementary budget will be financed entirely through excess tax revenue, without issuing government bonds. However, experts warn that, with oil-driven inflation already taking hold, it is difficult to dismiss concerns that the extra budget could further push up prices.
This year's annual budget already stands at a record 727.9 trillion won. Including the supplementary budget, total spending will top 753 trillion won. An increase in the money supply would add to inflationary pressures. A weak currency has already pushed up prices of imported foods like meat and fruit; now even petrochemical goods such as plastic containers are becoming more expensive.
Relief payments may provide a short-lived boost to demand, but their long-term impact is likely to be limited; rising prices would instead erode purchasing power. The burden of rising living costs falls more heavily on low-income households, where food and energy make up a larger share of spending. Every possible policy effort should be made to avoid stoking inflation.
In budget matters, fiscal soundness is as important as concerns about inflation. The supplementary budget allocates only 1 trillion won to debt repayment. That is less than 1 percent of this year's 108 trillion won fiscal deficit. Using excess tax revenue for cash handouts instead of saving it or repaying debt inevitably weakens the government's capacity to respond to emergencies.
The opposition has criticized the inclusion in the supplementary budget of support for the cultural and arts sector, which President Lee Jae Myung had earlier said was necessary.
The government argues the measures are needed to shore up the cultural and arts sector, where consumption tends to contract faster than in other industries during a downturn. Yet it is debatable whether support for independent film production and low-interest loans to arts businesses is urgent enough to warrant 200 billion won in supplementary spending. The People Power Party suggests the measure may be electoral, aimed at winning over cultural and arts figures ahead of the June 3 local elections.
The party has denounced the supplementary budget, including cash handouts, as indiscriminate giveaways aimed at gaining votes. Given the unprecedented crisis, however, the ruling and opposition parties have agreed to approve the supplementary budget at a National Assembly plenary session on April 10. In the National Assembly's review, nonessential items should be pared back or scrapped.
(END)
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## Expert Analysis

### Merits
- In budget matters, fiscal soundness is as important as concerns about inflation.

### Areas for Consideration
- It is difficult to characterize this as support for the economically vulnerable.
- However, it is questionable whether injecting money to ease price pressures is an appropriate measure.
- However, experts warn that, with oil-driven inflation already taking hold, it is difficult to dismiss concerns that the extra budget could further push up prices.

### Implications
- The headline measure — cash handouts — will see 100,000 won to 600,000 won per person paid to the bottom 70 percent of income earners, about 35.8 million people.
- The plan will cost 4.8 trillion won.
- This could reportedly result in even households with annual incomes above 100 million won receiving the cash payouts.
- At a time when prices are already rising and downward pressure on the Korean won is intensifying, an additional injection of liquidity into the market could further fuel inflation.

### Expert Commentary
This article covers budget, supplementary, won topics. Notable strengths include discussion of budget. Areas of concern are also raised. Readability: Flesch-Kincaid grade 0.0. Word count: 886.