World News

South Korea plans third extra budget, bond issuance to safeguard jobs

By Cynthia Kim

SEOUL (Reuters) – South Korea is preparing for a third supplementary budget and a 40 trillion won ($32.4 billion) fund to sharply increase subsidies to keep more Koreans in jobs and help businesses stay afloat through the course of the coronavirus outbreak.

In a policy meeting with economic chiefs, President Moon Jae-in said the fund will be created to help businesses keep jobs, while those who recently lost employment from temporary positions or freelance work will be eligible for subsidies up to three months.

The subsidies and cheap loans will help some 2.86 million people as vanishing jobs hit Asia’s fourth largest economy after months of self-isolation aimed at containing the coronavirus.

The nation’s workforce participation rate suffered its steepest decline since 2009 in March as demand for labour plunged due to the pandemic.

Finance minister Hong Nam-ki said in a briefing that it was ‘inevitable” a third supplementary budget for this year will be drawn up to finance part of some 10 trillion won needed for additional wage subsidies, job training and other loans. Most of it will be funded by issuing deficit-covering bonds, he said, without elaborating on the exact amount of the third extra budget.

Wednesday’s measures add to the 100-plus trillion won rescue package previously announced to inject liquidity into bond markets and companies struggling to secure a lifeline. The size of the stimulus has now increased to 135 trillion won, which will also be used to buy debt at companies with a low credit rating.

“The government will protect key sectors from failing through the ‘key sector stabilization fund’,” Moon told the meeting, without detailing specific sectors.

“Keeping jobs is the core part of coping with this national crisis and the most pressing issue related to survival.”

To finance the 40 trillion won fund, policy lender Korea Development Bank will issue bonds, while the government will offer loan guarantees. The scheme, as well as the supplementary budget bill, will require parliamentary approval, the government said.

Duty free businesses, exhibition centers and companies that support on-the-ground operations of airlines, such as cleaning and towing aircraft, will be eligible for additional support measures to help them keep jobs, Moon said.

(Additional reporting by Joyce Lee; Editing by Simon Cameron-Moore & Shri Navaratnam)