Vouchers for the people mean debt for local governments

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Vouchers for the people mean debt for local governments

Published: 29 Aug. 2025, 13:04 Updated: 31 Aug. 2025, 18:52

Audio report: written by reporters, read by AI

A banner promoting the use of consumer coupons hangs at Mangwon Market in Mapo District, Seoul, on Aug. 26. [YONHAP]

As the government prepares to distribute a second round of consumption vouchers next month, local governments say they are straining to find the money. With tax revenues falling, many municipalities are resorting to issuing debt or tapping into emergency funds to meet their share of the cost.

The Seoul city government has drawn up a 1.8 trillion won ($1.3 billion) supplementary budget, which includes 898.8 billion won earmarked for the second round of consumer coupons.

The central government will cover 548.8 billion won, but the city must supply the remaining 350 billion won from its own coffers. Seoul has already depleted its available resources after scraping together leftover funds during the first supplementary budget in June.

The capital has the highest financial self-sufficiency ratio among Korea's 17 major cities and provinces. As a result, its subsidy rate from the central government is only 75 percent, compared to 90 percent for other regions, leaving the city with a heavier burden. Seoul has decided to issue debt to cover the shortfall.

“We have no choice but to rely on the emergency measure of issuing local bonds [worth 350 billion won],” said Kim Seol-hee, head of the city budget office.

A sign promoting the use of consumer coupons is displayed at a dried seafood shop at Jungbu Market in Jung District, central Seoul, on Aug. 26. [NEWS1]

Busan faces a similar situation. It must secure 20.3 billion won for the coupon program and plans to issue municipal bonds.

“We have worked to reduce debt as much as possible in recent years, but we may have to issue the maximum allowable amount of local bonds this year,” said a Busan official. “The added interest costs could weaken our fiscal soundness in the future.”

Gwangju is also considering issuing local bonds to fund its 20.2 billion won share. The city faced friction with its five districts, whose financial self-sufficiency rates range from 12.5 to 19.6 percent, over how to divide the cost.

While districts pushed for an 80–20 split in their favor, the city insisted on a 50–50 arrangement. Gwangju ultimately agreed to provide an additional 10 billion won in special grants to the districts in exchange for keeping the 50–50 division.

Sejong, meanwhile, is weighing whether to issue bonds.

A customer pays for a meal with a card loaded with the government-issued consumer voucher at a restaurant in Jung District, Daegu, on July 22. [NEWS1]

Some municipalities are turning to existing disaster-related reserves. Daegu plans to cover its 18.7 billion won share using its disaster safety and relief funds, which will be included in a third supplementary budget next month.

Daejeon, which contributed 28.4 billion won in the first round, drew the money from its fiscal stabilization fund and intends to do the same for the second round.

Gyeonggi, home to the largest population in Korea, must contribute 180 billion won. But with real estate transaction taxes falling, the province has little choice but to slash spending across departments. Officials plan to cut 20 percent from discretionary budgets and reduce regular operating expenses by 10 percent for the first time since 2013 and restructure spending priorities.

North Jeolla, which must provide 7.7 billion won, is also preparing spending cuts.

North Chungcheong has tapped every available option for its 6.3 billion won share, including local bond issuance, its stabilization fund and unspent allocations for projects scheduled for the second half of the year.

Gangwon, whose finances are particularly strained, has asked the central government to fully cover its costs.

“For a province like ours, where even hundreds of billions of won are a heavy burden, requiring local matching funds is too much,” said Gangwon Gov. Kim Jin-tae. “We are not alone in this; many other provinces are in the same position.”

The 14 trillion won consumption voucher program was rolled out by the Lee Jae Myung administration to stimulate economic activity and support small businesses amid a sluggish recovery following an economic downturn. In the first round, Koreans and a small number of foreign nationals received coupons ranging from a minimum of 150,000 won, depending on their eligibility.

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.
BY KIM MIN-WOOK, SHIN JIN-HO, CHOI KYEONG-HO, LEE EUN-JI [[email protected]]