🚨 Nationwide Regional Currency 250,000 Won Payment: Economic Recovery vs Effectiveness Debate

Today Korean Economic News | 2025.06.16

📌 250,000 Won per Person for All Citizens: Large-Scale Public Welfare Policy Using Regional Currency

💬 The Lee Jae-myung government has announced plans to provide 250,000 won per person to all citizens through regional currency as economic recovery support. This 13 trillion won policy aims to boost local consumption and support small businesses, but there is heated debate about fiscal burden and effectiveness. The government emphasizes this as "a win-win policy that supports both struggling citizens and small business owners during economic downturn," while economic experts express concerns, saying "it may only have short-term effects and could harm fiscal health." Careful examination of the economic impact of regional currency and policy sustainability is needed.

1️⃣ Easy to Understand

The government announced it will give 250,000 won to every citizen. However, the key point is that it will be given as 'regional currency' rather than regular cash. Let's examine whether this policy will really help our economy.

First, let me explain what 'regional currency' is in simple terms. Regional currency is money that can only be used in specific areas, usually provided as cards or mobile apps. For example, if you receive 'Gyeonggi Regional Currency,' you can only use it at affiliated stores within Gyeonggi Province. You cannot use it at large supermarkets or online shopping malls, but only at local businesses like neighborhood supermarkets, restaurants, and hair salons.

The reason the government chose this method is clear. If they give regular cash, people might save it or spend it on online shopping, but with regional currency, they must spend it at local businesses. In other words, it's designed to directly help neighborhood small business owners.

Giving 250,000 won to all 52 million citizens requires a total of 13 trillion won. This is an enormous amount, equivalent to about 2.5% of the national budget. For a family of four, this means receiving 1 million won, which would be a great help to households.

However, there are significant problems. First, there's the fiscal issue of where to get this money. The government must either borrow money or cut other budgets. Second, there's the effectiveness issue of whether this will really help economic recovery. During COVID-19, similar policies were implemented, but many evaluated them as having only temporary effects.

Economists call such policies 'helicopter money' and urge careful approach. Like dropping money from the sky, the economy may look better temporarily, but there are limits to solving fundamental problems.

While it's true that our country's economy is struggling, we need to carefully consider whether it can be solved just by distributing money.

2️⃣ Economic Terms

📕 Regional Currency

Regional currency is money that can only be used in specific regions, issued to activate local economies.

• Provided as cards or mobile apps, usable only at small business affiliates within the region.
• Usage is restricted at large supermarkets, online shopping malls, and entertainment establishments.
• Cannot be exchanged for cash, designed to be consumed within the local area.

📕 Economic Recovery Support Fund

Economic recovery support fund is cash assistance provided by the government for citizens' livelihood stability during economic downturns or crises.

• Similar in nature to COVID-19 disaster relief funds.
• Part of expansionary fiscal policy aimed at promoting consumption and economic stimulus.
• Provides certain amounts to all citizens or specific groups.

📕 Small Business Owners

Small business owners are small-scale business operators with fewer than 10 regular employees or annual sales under 12 billion won.

• Mostly life-related service industries like neighborhood marts, restaurants, cafes, hair salons, and laundromats.
• They represent over 90% of all businesses in Korea and are key economic players.
• They are sensitive to economic fluctuations and have weaker management stability compared to large corporations.

📕 Multiplier Effect

The multiplier effect represents the size of ripple effects that government spending increases have on the entire economy.

• When the government spends 1 trillion won, it ultimately creates effects of more than 1 trillion won on the entire economy.
• Regional currency is expected to have greater multiplier effects due to local circulation.
• However, effects are limited if much money leaks out through savings or imported goods purchases.

3️⃣ Principles and Economic Outlook

✅ Economic Mechanisms and Effects of Regional Currency Policy

• Let's analyze how regional currency works in the economy and its expected effects.

  • First, regional currency maximizes multiplier effects through local circulation of consumption. Unlike regular cash support, regional currency is restricted to local small businesses, preventing money from flowing out of the region. For example, when a citizen uses 250,000 won in regional currency at a local restaurant, the restaurant owner pays for local ingredients with that money, and the ingredient supplier consumes again within the region, creating a virtuous cycle. According to research by the Korea Research Institute for Local Administration, regional currency input of 1 won shows local economic effects of 1.3-1.5 won. This is 30-50% higher than regular cash support (0.8-1.0 won). This effect becomes even greater in more closed regions.

  • Second, it brings direct effects on increasing small business sales and employment stability. Regional currency cannot be used at large supermarkets or online malls, so benefits are concentrated on small business owners. According to Gyeonggi Research Institute analysis, small business sales increased by an average of 15-20% after introducing Gyeonggi Regional Currency, with particularly large increases in restaurants and retail businesses. Sales increases lead to employment growth, contributing to local job creation. There was an average additional employment effect of 0.3 people per small business. Applied to 4 million small businesses nationwide, this could create 1.2 million jobs. This is expected to help alleviate current youth unemployment.

  • Third, it contributes to digital payment system expansion and data-based policy making. Regional currency is mostly provided as cards or mobile apps, promoting digital transformation among small business owners. Small businesses that were cash-centered are becoming familiar with digital payments, improving management efficiency. Also, all transaction data is accumulated, allowing the government to monitor policy effects in real-time. They can understand which industries use how much, what regional consumption patterns are like, and utilize this for future policy design. This enables scientific policy making based on data, moving away from abstract policy evaluations.

• Regional currency policy can bring structural improvement effects that strengthen local economic ecosystems beyond simple cash support. However, for these effects to continue, building regular and predictable systems rather than one-time payments is necessary.

✅ Fiscal Burden and Policy Sustainability Issues

• Let's examine the burden from large-scale fiscal spending of 13 trillion won and long-term sustainability.

  • First, large-scale fiscal spending can cause increased national debt and deteriorated fiscal health. 13 trillion won is an enormous amount equivalent to about 2% of the total 2025 budget of 677 trillion won. To raise this money, they must either increase government bond issuance or drastically cut other budgets. While Korea's national debt is currently at 54% of GDP, considered safe, there isn't much fiscal room considering aging society and increasing welfare spending. Especially considering the experience of already organizing four supplementary budgets for COVID-19 response, additional large-scale spending should be cautious. The International Monetary Fund (IMF) has advised the Korean government to "focus on selective support to maintain fiscal health."

  • Second, due to the one-time nature of the policy, long-term economic structural improvement effects may be limited. Looking at past COVID-19 disaster relief fund cases, consumption increased temporarily right after payment, but returned to original levels after 3-6 months. This shows that without fundamental income increases or economic structural improvements, one-time support effects are difficult to sustain. Moreover, if current economic downturn causes are not simple consumption shortage but structural problems like high interest rates, real estate slump, and employment instability, regional currency alone cannot solve fundamental issues. There's also risk of delaying necessary structural reforms by relying on temporary measures.

  • Third, inflation pressure and side effects on the real estate market should also be considered. When 13 trillion won of additional liquidity enters the market, short-term economic stimulus effects through consumption increases can be expected, but long-term price increase pressure may rise. Especially in the current situation where the Bank of Korea maintains high interest rate policy to suppress inflation, large-scale fiscal expansion may conflict with monetary policy. There are also concerns that people whose living cost burden decreases due to regional currency might use spare funds for real estate investment, potentially fueling real estate market overheating. The government needs detailed policy design and monitoring systems to minimize such side effects.

• While fiscal policy plays an important role in economic stabilization, excessive dependence can harm the economy's health in the long term. For effective regional currency policy, clear goal setting and exit strategy preparation are essential.

✅ Alternative Policy Directions and Improvement Plans

• Let's explore improvement plans that can enhance regional currency policy effects and minimize side effects.

  • First, policy effects should be maximized and fiscal burden reduced through selective support. Supporting low-income groups, small business owners, and specific regions in a concentrated manner may be more effective than giving to all citizens. If given only to the bottom 50% of household income, the budget could be halved while expecting greater consumption increase effects. This is because low-income groups have higher consumption propensity than high-income groups. Also, concentrated support for regions with severe economic downturns or industries heavily damaged by COVID-19 could be considered. For example, prioritizing payments to workers in tourism, restaurant, and retail industries could promote rapid recovery in those sectors. This way, greater policy effects could be achieved with the 13 trillion won budget.

  • Second, it should be developed into a regular and predictable system rather than one-time payment. For regional currency to have real effects, stable demand should be provided so small business owners can predict the future and invest. For example, regularly issuing 'Regional Love Gift Certificates' or providing earned income tax credits or child allowances as regional currency could be considered. Also, paying certain percentages of public servant salaries as regional currency or providing incentives for using regional currency when paying local taxes could expand the regional currency ecosystem in various ways. This could develop it into a sustainable local economic system rather than a temporary policy.

  • Third, innovative regional currency models linked with digital technology should be developed. Rather than simply distributing money, it should be used as a tool to promote digital transformation and innovation of the entire local economy. Transparent transaction systems using blockchain technology, customized commercial district analysis through big data analysis, and AI-based consumption pattern prediction could be introduced. Also, additional services should be developed, such as providing management consulting to small business owners based on regional currency usage data or sharing demand prediction information. This way, regional currency could evolve beyond simple consumption promotion tools into innovation platforms leading local economy smartification.

• For regional currency policy success, approaches should focus not only on short-term economic stimulus effects but also on long-term local economic ecosystem construction. New model development combining technological innovation and policy innovation is needed.

4️⃣ In Conclusion

The nationwide regional currency 250,000 won payment policy is meaningful as the government's active response to real problems of economic downturn and small business crisis. The policy goals of multiplier effects through local consumption circulation and direct small business support are clearly valid.

However, the massive fiscal spending of 13 trillion won and resulting national debt increases, limitations of policy one-time nature, and absence of structural problem solutions are issues that should be carefully considered. Especially considering past disaster relief funds' temporary effects, sustainable effects may be difficult to expect without fundamental economic structural improvements.

Most importantly, this policy should be part of a strategy for genuine economic recovery, not simple populism. Policy completeness should be enhanced through efficiency improvements via selective support, development into regular systems, and combination with digital innovation.

Also, balancing fiscal health and policy effects is important. While solving immediate difficulties is necessary, policies should be designed within limits that don't impose excessive burdens on future generations.

For regional currency policy to succeed, citizens' understanding and cooperation are essential. Policy purposes and limitations should be clearly explained, and trust should be gained through transparent execution and strict evaluation.

Ultimately, regional currency policy can become a new experiment to change our economic constitution and strengthen local economic ecosystems. If sustainable systems are built from long-term perspectives without rushing for short-term results, it could become an innovative policy that turns crisis into opportunity.