South Korea’s new administration has announced a $14.7 billion supplementary budget aimed at boosting consumer spending and reviving the economy. Under the plan, every citizen will receive “Living Recovery Vouchers” ranging from $109 to $365, depending on income level.
The program is a hybrid approach that combines universal distribution with targeted support for low-income groups. The top 10% income bracket (5.12 million people) will receive about $109, while the general population (42.96 million people) will get $182 each. The near-poor (380000 people) will receive $292, and recipients of basic livelihood assistance (2.71 million people) will be granted the full $365. For a family of four, the average value of vouchers comes to approximately $731.
The budget also includes an expansion of local currency gift certificates-part of President Lee Jae-myung’s signature regional stimulus initiative-as well as the activation of a “bad bank” program to help small business owners and self-employed individuals manage debt. Debts under $36557 that have been in default for over seven years will be written off.
President Lee chaired a Cabinet meeting on June 19 to approve the new supplementary budget, the first of his administration and the second additional budget passed this year-just 15 days after the new government took office.
In total, the revised budget amounts to $22.3 billion, which includes the $14.7 billion in new spending and a $7.5 billion revenue adjustment to offset tax shortfalls. With this additional funding, total government expenditure will rise from the previously approved $492 billion to $513 billion, marking the first time spending will exceed $511 billion.
Vice Finance Minister Lim Ki-geun said the government acted with “unprecedented speed” to draft the supplementary budget in response to economic pressures faced by households and small businesses. “This budget is grounded in the real economy and focused on practical, efficient solutions,” he said.
The proposal will be submitted to the National Assembly on June 23, with a full vote possible by early next month following committee reviews.
The consumer voucher initiative alone totals $9.6 billion ($7.5 billion from central government funds and $2.1 billion from local budgets). It will be distributed in two rounds, with eligible citizens receiving prepaid cards, regional gift certificates, or credit/debit card credits.
An additional $438 million will be allocated to expand the issuance of regional gift certificates, bringing the total for the year to $21.1 billion.
Other stimulus measures include up to $219 in reimbursements for energy-efficient appliance purchases and the issuance of 7.8 million discount coupons for hotels, movie theaters, sports facilities, art exhibitions, and live performances.
To revitalize the sluggish construction sector, $1.9 billion will be invested in projects such as purchasing 10000 unsold housing units over the next three years and accelerating infrastructure investments in railways and ports.
A separate $292 million will be used to establish a government-run bad bank under the Korea Asset Management Corporation. This institution will purchase and cancel unsecured personal debts under $36536 that have been overdue for more than seven years, benefiting an estimated 1.13 million individuals with total canceled debt expected to reach $11.9 billion.
On the revenue side, the government lowered its national tax revenue forecast from $279 billion to $271 billion, marking the first mid-year revenue revision in five years. Although not as severe as past shortfalls in 2023 ($41.2 billion) and 2024 ($22.5 billion), this year’s deficit is projected to reach $7.3 billion.
To fund the $22.2 billion in extra spending and revenue shortfall, the government will issue $14.4 billion in new bonds. Additional resources will come from spending cuts ($3.8 billion), available funds from government-run programs ($1.8 billion), and adjustments to foreign exchange stabilization bond issuance ($2.1 billion).
Relying heavily on debt will worsen fiscal indicators. The managed fiscal deficit will rise from $54 billion to $80.6 billion, pushing the deficit-to-GDP ratio to 4.2%. National debt, including both central and local governments, is expected to increase to $950 billion, raising the debt-to-GDP ratio to 49%, up 1.6 percentage points from last year.
“We always keep fiscal sustainability in mind,” Vice Minister Lim said. “But given the serious economic challenges and hardships people are facing, we believe a more proactive fiscal stance is necessary at this time.”
