Seoul: President Lee Jae Myung on Thursday urged the National Assembly to approve a supplementary budget expeditiously to manage the economic repercussions of the Middle East conflict, highlighting the necessity for extraordinary measures to tackle the crisis.
According to Yonhap News Agency, in his budget speech, President Lee detailed the 26.2 trillion-won (US$17.1 billion) supplementary budget, labeling the situation as an "unexpected, multifaceted" crisis as the U.S. conflict with Iran persists into its second month. He emphasized the need for urgent actions, indicating that the government perceives the situation as a wartime-level crisis impacting the national economy, necessitating the mobilization of all available resources.
The President pointed out that disruptions in oil supply have led to increased gasoline and diesel prices, while shortages of critical raw materials, like naphtha and urea, pose threats to various sectors, including plastics and fertilizers. The closure of the Strait of Hormuz following U.S.-Israeli strikes on Iran in late February has significantly disrupted global oil supplies, which is critical for South Korea due to its heavy reliance on energy imports.
Lee stressed that the situation might not resolve quickly, making a more comprehensive and proactive response crucial. The extra budget is designed to offer robust support for socially vulnerable groups during this crisis and to ensure timely economic recovery. A significant part of the proposal includes 4.8 trillion won in cash handouts targeted at the bottom 70 percent of income earners, affecting approximately 35.8 million people with payments ranging from 100,000 won to 600,000 won based on income level, region, and population decline factors.
Over 10 trillion won is earmarked to mitigate the effects of high oil prices, with an additional 5.1 trillion won dedicated to a fuel price cap program and measures to counter potential naphtha supply disruptions. The government, since March, has been setting maximum prices for fuel products supplied by refiners, adjusting biweekly to reflect global oil price changes.
President Lee also outlined plans to strengthen the supply chain by securing naphtha supplies, bolstering petroleum stockpiling, and establishing a fair oil distribution system with enhanced price transparency and stricter oversight of illegal activities. He assured that the budget would be financed without issuing government bonds, utilizing 25.2 trillion won in additional tax revenues from robust stock market performance and the semiconductor sector.
The ruling Democratic Party and the main opposition People Power Party have reached an agreement to pass the budget bill by April 10.