South Korea injects $15 billion in financing for SMEs amid high exchange rates

The South Korean government announced a comprehensive support package, injecting approximately 15 trillion won in policy financing to aid small and medium-sized enterprises (SMEs) grappling with the impact of high exchange rates. This initiative was decided during an emergency economic headquarters meeting on July 3, chaired by Deputy Prime Minister and Minister of Economy and Finance Koo Yoon-cheol.

The decision follows a period where the won-dollar exchange rate has consistently remained in the mid-1,500s, closing at 1,555.8 won on July 2. This sustained high rate poses significant challenges for businesses, particularly those involved in imports and exports. The government aims to alleviate the financial burden on these companies through targeted financial assistance.

The support package includes 14.9 trillion won in emergency management funds for SMEs facing difficulties due to the high exchange rate. This comprises 13.8 trillion won from previously allocated funds for companies affected by Middle East situations, supplemented by 1.1 trillion won in new funding. Specific measures include establishing a dedicated track for high-exchange-rate affected SMEs within the Small and Medium Business Corporation's emergency management fund (300 billion won), and introducing ultra-low-interest loans at the Export-Import Bank of Korea's funding cost rate (300 billion won).

Further support includes loans from Industrial Bank of Korea to ease raw material costs (200 billion won), and an increase in the guarantee ratio from 95% to 100% by the Korea Technology Finance Corporation, along with a reduction in guarantee fees. The government also plans to offer repayment deferrals and maturity extensions for policy loans. Additionally, trade insurance and currency fluctuation insurance support for importers will be strengthened. The eligibility for import insurance will be broadened, and import insurance premiums for SMEs without export records will be halved until April next year. The supply of currency fluctuation insurance will also increase by 100 billion won to 1.3 trillion won, with expanded coverage for all import items except luxury goods.

For SMEs experiencing severe financial difficulties due to the high exchange rate, the government will also extend deadlines for corporate tax, value-added tax, income tax, and customs duty payments. The Ministry of Economy and Finance stated that it will closely monitor corporate difficulties and consider additional support measures if necessary, ensuring the swift implementation of the current relief plan.

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We plan to swiftly alleviate the management burden for SMEs struggling with high exchange rates by implementing the key tasks of this measure without setbacks, and will continuously explore additional support measures while closely monitoring corporate difficulties.