South Korea offers $9.7B relief as weak won hits firms

July 3 (Asia Today) -- South Korea will provide 14.9 trillion won ($9.7 billion) in emergency financing and expand tax and trade-insurance support for small and midsize companies struggling with higher import costs caused by the weak won.

The government announced the measures Friday during an emergency economic meeting chaired by Deputy Prime Minister and Minister of Finance and Economy Koo Yun Cheol at Government Complex Sejong.

The package is intended to improve liquidity for companies facing rising raw-material costs and financing pressures as the won remains weak against the U.S. dollar.

The government will redirect 13.8 trillion won ($9 billion) in unused capacity from a 23.7 trillion won ($15.5 billion) policy-financing program previously established in response to the Middle East crisis.

An additional 1.1 trillion won ($719 million) in new financing will also be provided. The government said the total could be increased depending on demand and the pace at which available funding is used.

The Korea SMEs and Startups Agency will establish a special emergency stabilization fund for companies affected by the exchange rate.

Small companies that import raw materials or components worth at least 20% of annual sales will be allowed to apply without meeting an existing requirement that sales or operating profit must have fallen by at least 10%.

The Export-Import Bank of Korea will increase its special crisis-response program from 7 trillion won ($4.6 billion) to 8 trillion won ($5.2 billion).

The bank will also increase its maximum interest-rate reduction from 2 percentage points to 2.2 percentage points.

A new ultralow-interest loan program will provide financing at rates close to the state-run bank's own funding costs for companies affected by the high won-dollar exchange rate.

The Korea Technology Finance Corp. will raise the coverage ratio for its emergency business stabilization guarantees from 95% to 100%. The reduction in guarantee fees will increase from 0.3 percentage points to 0.4 percentage points.

Companies already using government policy loans may also receive repayment deferrals and loan-maturity extensions.

The government will expand import insurance and currency fluctuation insurance to help businesses manage exchange-rate risks.

Small and midsize companies without an export record will be allowed to purchase import insurance, which was previously more difficult for companies focused primarily on the domestic market to obtain.

Import insurance premiums will be discounted by 50% through April 2027.

Companies facing higher costs for essential imported raw materials may also receive up to twice the normal loan-guarantee limit from the state-run Korea Trade Insurance Corp.

The amount available under the government's currency fluctuation insurance program will increase from 1.2 trillion won ($785 million) to 1.3 trillion won ($850 million).

Premium discounts for small companies will double from 15% to 30%.

Eligibility for the insurance will also expand from selected raw-material importers to companies importing nearly all categories of goods, excluding luxury products.

The government will establish a separate 10 billion won ($6.5 million) export-voucher program for companies affected by the exchange rate.

The maximum trade-insurance premium support available through the voucher system will temporarily double from 10 million won ($6,500) to 20 million won ($13,100).

The government also plans to allow insurance support to be paid in advance rather than reimbursed after the insurance contract ends.

Small companies borrowing from the Export-Import Bank of Korea will be offered a free option to convert loans between the won and foreign currencies or between two foreign currencies.

Tax relief will be provided alongside the financing programs.

Payment deadlines for corporate income tax, value-added tax, individual income tax and customs duties may be extended for companies experiencing exchange-rate-related financial difficulties.

The government will also provide consulting to help companies reflect currency movements in agreements that link subcontracting payments to changes in raw-material costs.

Companies that effectively operate the system may receive incentives, including exemptions from certain government-initiated investigations into subcontracting practices.

Financial institutions will receive credit under a government evaluation index for providing assistance to small companies affected by the weak won.

Regional export support centers will serve as one-stop contact points for companies seeking information on financing, insurance, tax relief and other assistance.

The government said it would continue reviewing the difficulties faced by businesses and consider additional measures if needed.

-- Reported by Asia Today; translated by UPI

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Original Korean report: https://www.asiatoday.co.kr/kn/view.php?key=20260703010001157

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