On March 29, the ruling party, the government and Cheong Wa Dae agreed to an emergency disaster relief fund of 1 million won per (4-member) household to 14 million households--70% of all households--in an effort to overcome the COVID-19 crisis.

The ruling party and the government had had different views on the scale and scope of the government funding, but they finally managed to reach an agreement. President Moon Jae-in will announce the government’s final position in the third emergency economic policy meeting on March 30.

The Democratic Party of Korea, the Ministry of Economy and Finance, and Cheong Wa Dae held a meeting of senior officials at the official residence of the prime minister in Samcheong-dong, Seoul and reportedly narrowed their differences and agreed to provide a million won in gift certificates or debit cards to 14 million households earning 150% or less of the median income.

About 35 million people--70% of all citizens including the middle class--with the exception of the high-income tier, will be eligible to receive the funds. Based on a four-member household, families earning slightly over 7 million won a month will be able to receive cashable support of a million won. The amount is expected to decrease for one to three-person households and increase for families with five or more members. Such an emergency disaster relief fund is expected to require a budget of 8-9 trillion won. In the past, the Ministry of Economy and Finance had argued for cash payment of 1 million won per four-person household to 10 million households with an income of less than 100% the median income. This meant that 50% of the 20 million households nationwide would receive funding. According to the ministry, even if the government provides cash payments to the majority of the citizens, it would not become a significant economic stimulus, while it could lead to side effects, such as the surge of market interest rates when the government issues more deficit-financing bonds. So the ministry argued that such funding should be provided to a limited range. The ministry argued that in the future, if the nation ever came to face the worst possible situation, such as massive unemployment, the government might lack “ammunition” to respond properly, and called for the government to be prepared. Meanwhile, the Democratic Party had considered handing out 500,000 won to individuals with income levels in the lower 70%. The party opposed the government measure claiming, “It would not be effective when the local economy is crashing down.”

Lawmaker Kim Boo-kyum, a representative of a district in Daegu, directly hit by COVID-19, criticized, “The finance ministry is caught up in dogma on fiscal soundness,” and demanded a more aggressive role from the government.

The conclusion reached by the senior officials this day had households as the unit of payment as argued by the finance ministry, but reflected the demands of the ruling party and increased those eligible for the funding from 50% to 70% of the population. The officials managed to agree on a compromise, which lay between the original budget proposed by the finance ministry of 5-6 trillion won and the ruling party’s 18 trillion won.