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What comes after a ‘good’ supplementary budget?

Published: 17 Mar. 2026, 00:02

Suh Kyoung-ho

The author is an editorial writer at the JoongAng Ilbo.

The global economy is under strain from the Iran war that U.S. President Donald Trump set in motion, opening what many describe as a “Pandora’s box.” The conflict, launched without a clear exit strategy, is not ending as quickly as Trump suggested when he likened it early on to a “picnic.”

President Lee Jae Myung speaks during a meeting with senior presidential secretaries at Yeomingwan in the presidential office in Cheong Wa Dae on March 12. Lee instructed officials to “prepare a supplementary budget as quickly as possible” during the meeting. [JOINT PRESS CORPS]

Although the world has reduced its dependence on fossil fuels and invested in improving energy efficiency, the war has exposed a stark reality. The global economy remains vulnerable to shocks in oil and natural gas markets as well as instability in the Middle East.

Korea’s financial markets have reacted sharply. Korean stocks and the value of its currency have fallen more than those of the United States — a direct party to the conflict — and even more than Japan, whose economy depends more heavily on Middle Eastern energy. Markets appear to view Korea’s exposure to Middle East risks as particularly significant.

One number has begun appearing frequently in news reports and financial analyses: 2008. In a recent report, Bank of America warned that conditions in global financial markets are beginning to resemble those seen just before the 2008 global financial crisis.

International oil prices rose from about $70 per barrel in July 2007 to $147 a year later, shortly before the subprime mortgage crisis erupted. The report was written by Michael Hartnett, a strategist known for reading market trends closely. Since mid-2024, he has warned about a bubble in U.S. technology stocks and recommended buying equities outside the United States.

With oil prices surging due to the Iran war, many investors are watching anxiously as financial vulnerabilities emerge elsewhere. One concern is instability stemming from losses in the private credit market.

The 2008 financial crisis was fueled in part by the rapid growth of shadow banking outside traditional financial regulation. Various complex instruments backed by mortgage loans proliferated beyond the oversight of banks and regulators.

A similar risk is now emerging in private credit. Private equity funds and asset management firms have increasingly raised money from institutional investors and lent to mid-sized companies with low credit ratings. As problems surface in that market, analysts say it will require careful monitoring.

Against this backdrop, the Korean government has formally announced plans for an early supplementary budget. During a Cabinet meeting last week, President Lee Jae Myung raised the need for such a measure. Deputy Prime Minister and Finance Minister Koo Yun-cheol responded that the government would proceed “without issuing government bonds.”

In past administrations, supplementary budgets financed without additional borrowing — using surplus tax revenue or other already secured resources — were sometimes described as “good supplementary budgets.” In that sense, the plan now under discussion also fits that description.

Korea adopted a similar approach during the surge in oil prices in 2008. At the time, the government proposed a supplementary budget aimed at easing fuel costs for low-income households. The plan amounted to 4.6 trillion won ($3 billion), financed with a surplus carried over from the previous year.

However, the supplementary budget lost much of its effectiveness because it was delayed. The government submitted the proposal to the National Assembly in June, but it was not approved until September — three months later. The delay was largely due to political paralysis in the Assembly following large candlelight protests over U.S. beef imports.

Still, the record of the Assembly’s budget committee meetings in September shows lawmakers carefully reviewing the legal conditions required for a supplementary budget. Because the National Finance Act had recently taken effect, the measure was the central government’s first supplementary budget under the new framework.

Lawmakers examined whether there had been a significant economic change such as a recession or mass unemployment, whether the situation was urgent enough to require action before the next annual budget, whether existing reserves could address the problem and whether the funds could realistically be spent within the same fiscal year.

President Lee had already mentioned the possibility of a supplementary budget several times even before the Iran war began. He referred to it when ordering the National Tax Service to establish a task force to manage large-scale tax delinquencies and again during a meeting with senior aides when discussing expanded financial support for culture and the arts.

For budget officials, the repeated references to a supplementary budget may have been puzzling. The main budget had barely been finalized, and the circumstances did not appear urgent enough to require additional spending. In many cases, such issues could have been addressed through contingency reserves. Still, the tendency to mention supplementary budgets frequently is not unique to the current administration. Previous governments have done the same.

The supplementary budget now under discussion likely meets the legal requirements under the National Finance Act. Yet, the way the measure is being discussed remains somewhat unusual.

An LPG gas tanker at anchor as traffic is down in the Strait of Hormuz, amid the U.S.-Israeli conflict with Iran, in Shinas, Oman, March 11, 2026. [REUTERS/YONHAP]

Even if it is a “good supplementary budget,” public debate has focused first on its size — around 15 trillion won — rather than its purpose. The order of priorities should be reversed. Policymakers should first decide what the funds will be used for and then select effective programs to support those goals.

History offers a cautionary lesson. After the 2008 “good supplementary budget,” the government introduced the largest supplementary budget in Korea’s history the following year — a “super supplementary budget” worth 29 trillion won in addition to the regular 2009 budget.

That measure was not “good” in the sense of avoiding debt. It required the issuance of large amounts of deficit-financing government bonds. As the global financial crisis intensified, the Group of 20 economies launched coordinated policy responses, and Korea also needed to deploy fiscal resources “preemptively, boldly and sufficiently.”

A responsible government should not design supplementary budgets simply based on how much additional tax revenue is available. Instead, spending should be carefully limited to what is truly necessary, preserving fiscal capacity for future crises.

After all, the need for decisive fiscal intervention — like the super supplementary budget of 2009 — is likely to arise again.

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.