South Korea’s ruling Democratic Party and the government have agreed to submit an extra budget bill to the National Assembly next week, announced Budget Minister Park Hong-keun on Thursday. The move aims to mitigate the economic fallout on vulnerable sectors resulting from the ongoing Middle East conflict.
Set to be submitted next Tuesday, the supplemental budget seeks to alleviate the burden of rising oil prices and provide support to small and medium-sized enterprises (SMEs) and vulnerable households affected by the prolonged war.
“Our immediate priority is to ease the burden on citizens caused by high oil prices and facilitate the smooth implementation of an oil price cap system. This will stabilize domestic fuel prices and reduce fuel costs,” stated Budget Minister Park Hong-keun during a consultative meeting between government officials and DP lawmakers at the National Assembly.
The extra budget will enable the government to compensate oil refineries for potential financial losses incurred due to the price cap system, which sets maximum prices for oil products supplied to gas stations and distributors.
The government intends to expand assistance programs for low-income households, small business owners, and young people. It will also focus on “eliminating blind spots” in welfare services to ensure that daily life is not significantly impacted by high oil prices and inflation stemming from the Middle East conflict.
Furthermore, the supplementary budget will prioritize support for companies and industries affected by the crisis by helping stabilize supply chains and accelerating energy transition initiatives.
The extra budget includes provisions for expanding oil reserves and ensuring a stable supply of naphtha, rare earth elements, and urea.
South Korea is currently facing shortages of naphtha, a crucial feedstock for the petrochemical industry. A significant portion of its naphtha imports are transported through the Strait of Hormuz, a vital shipping route that has been effectively disrupted due to escalating tensions involving Iran.
To reduce long-term dependence on fossil fuels, the government also plans to allocate budget funds to support the installation of renewable energy systems, such as solar power, for households.
“The main opposition People Power Party has proposed delaying a review of the extra budget until mid-April, at a time when a timely response is critical. This is a golden opportunity that must not be missed,” said DP floor leader Han Byung-do. This statement comes amid criticism from the opposition party that the budget is a pre-election tactic to sway voters ahead of the June 3 local elections.
Han emphasized that the DP and the government will expedite the review of the budget bill in the National Assembly, stating that there is “absolutely no reason for delay.”
