[Editorial] “Middle East-Origin Supplementary Budget” and High Oil Price Damage Support... Time to Restore Economic Strength

On March 31, the government approved a supplementary budget proposal worth 26.2 trillion won at a Cabinet meeting. According to the government’s explanation, this supplementary budget is an emergency response aimed at easing the shock of high oil prices and high inflation caused by the war in the Middle East. The problem is that the government has once again turned to large-scale fiscal spending and cash support as its first means of responding to a crisis.

In fact, the supplementary budget includes 10.1 trillion won to ease the burden of high oil prices, 2.8 trillion won to support low-income households, small business owners, and young people, and 9.7 trillion won to expand local governments’ investment capacity. It also includes a plan to provide high-oil-price damage relief payments of 100,000 to 600,000 won per person to the bottom 70% by income. The plan is structured so that recipients in the Seoul metropolitan area receive 100,000 won, those outside the metropolitan area 150,000 won, and those in specially favored or special regions experiencing population decline 200,000 won or 250,000 won, while the near-poor, single-parent households, and basic livelihood recipients receive higher amounts.

A supplementary budget should originally be an exceptional and temporary measure. However, recent fiscal policy has increasingly hardened into a pattern in which a supplementary budget is immediately drawn up whenever a shock occurs, and consumption is propped up through cash-type support.

This time as well, the government signaled its intention to design the relief payments in the form of credit cards, debit cards, and local currency so that they lead to consumption rather than savings. But simply because the government hands out money does not mean ordinary people will prosper or that the economy’s underlying strength will recover. If consumption alone is artificially stimulated without improving production, investment, and supply capacity, there may be a temporary illusion of effect, but the economy’s fundamental strength may in fact weaken.

Moreover, even if this cash-type support is not a “payment to the entire population,” it still targets the very broad range of the bottom 70% by income. If this is truly crisis response, support should be precisely concentrated on the groups, industries, and regions that have actually been hit the hardest. Otherwise, fiscal policy is likely to be distorted into a means of maximizing political satisfaction by distributing thinly to many people, rather than providing substantial support where it is most urgently needed.

The method of responding to high oil prices is also problematic. The government says it will reduce the burden through measures such as a maximum price system for petroleum, reduced fuel costs, and expanded K-Pass refunds. However, an approach that administratively suppresses prices and adds subsidies is highly likely to distort the signals of conservation and adjustment that market prices convey.

What is needed in an era of high oil prices is not price controls or fiscal injections, but structural responses such as reviewing the tax structure, stabilizing energy supply chains, improving logistics efficiency, and encouraging private-sector investment in alternative energy.

The government explains that this supplementary budget will be financed through excess tax revenue and fund resources without issuing additional government bonds. But the fiscal burden does not disappear simply because more government bonds are not issued. Excess tax revenue is also a resource created by the national economy, and it is not pocket money to be spent lightly.

In the end, the essence of this “Middle East-driven supplementary budget” is closer to a reaffirmation of fiscal omnipotence than a response to crisis. If tax revenue came in higher than expected, a more responsible choice may be to use it first to reduce national debt or secure fiscal capacity for future crises. Cash support can hardly be the answer every time a crisis arises.

What is needed now is a policy shift toward restoring the economy’s fundamental strength. Only if the real-economy foundations—such as corporate production and investment, logistics and supply chains, and energy procurement—are revived can the shocks of high oil prices and high inflation be absorbed. It is time for policy to focus less on short-term stimulus dependent on fiscal spending and more on normalizing market functions and restoring private-sector vitality.

2026. 4. 1.

Center for Free Enterprise (CFE)

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Original title: [논평] ‘중동발 추경’과 고유가 피해지원금.. 경제 기초 체력과 시장기능 회복에 집중할 때

Author: Center for Free Enterprise (CFE)

Date: 2026-04-01

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=comment&pn=1&idx=28756