(BOK)
The South Korean government will maintain its oil price cap system until the conflict in the Middle East comes to an end, according to Koo Yun-cheol, the country’s Deputy Prime Minister and Minister of Finance and Economy.
Speaking at a press briefing following the ASEAN+3 Finance Ministers and Central Bank Governors’ Meeting held in Samarkand, Uzbekistan, on Tuesday, local time, Koo noted that “the most important factor regarding the oil price cap is how quickly the Middle East situation changes.”
“Due to uncertainty surrounding the conflict, international oil prices have risen above $100 per barrel,” he said. “If oil prices remain at this level, the government believes it must respond with a comprehensive set of policies.”
Korea’s oil price cap system functions as a type of subsidy program. Oil refiners lower fuel prices, submit calculations of the losses, and the government reimburses them afterward. The government previously included an additional 4.2 trillion won ($2.9 billion) in supplementary budget funding to support the six-month program.
“Right now, our focus is on implementing the first supplementary budget,” Koo said. “Since we allocated 26.2 trillion won in this supplementary budget, we are concentrating on swift execution. We will also focus on implementing the main budget, which is close to 730 trillion won.”
Despite the added fiscal burden of the subsidies, Koo noted that robust tax revenue—driven by a boom in the semiconductor sector and a thriving stock market—has bolstered the country’s fiscal capacity.
He also highlighted that Korea’s projected debt-to-GDP ratio of 52.3 percent for 2025 remains significantly lower than the 108 percent average among the 38 advanced economies in the OECD.
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