SEOUL (Reuters) - South Korea’s much-hyped household debt relief program, a key policy pledge from new President Park Geun-hye, launched on Friday with far less money than planned in the latest sign the leader was struggling to gain traction.
Park took power in February after a bruising election campaign fought largely over the economy and identified debt relief and narrowing rising income inequality as key policy platforms.
She pledged 18 trillion won ($16.18 billion) for the fund which debuted with just 800 million won and which will target 324,000 people, a tenth of the 3.2 million people Park had promised would benefit from the plan.
“I‘m disappointed in Park Geun-hye, I really thought she would do more to solve the debt crisis,” said Kim Shin-hong, a 51-year-old man waiting in line at the Credit Counselling & Recovery Service offices in downtown Seoul on Thursday.
South Korean household debts are 156 percent of disposable income and act as a major drag on Asia’s fourth-largest economy, which the government expects to grow just 2.3 percent this year.
Park’s approval rating slipped to 41 percent in a poll conducted by Gallup, making her the nation’s most unpopular leader in the early weeks on the job.
Ambitious spending plans under her 140-point program for her single five-year term, such as free care for children under 5 and an additional monthly allowance of 200,000 won to seniors aged 65 or older, took a further blow on Friday when the government said its revenues this year would be $10.8 billion short of plan.
Meanwhile, a series of bungled appointments have dominated the headlines of local newspapers as her top picks for prime minister, defense chief and vice-justice minister resigned in disgrace over inappropriate financial arrangements, and, in one case, a sex tape.
The debt scheme will write-off up to 70 percent of debt or exchange it for lower-interest loans in a country where the Bank of Korea, the central bank, estimates that 6.6 million people are at “high risk of default”.
To qualify, individuals must have debts of up to 100 million won that are not backed by collateral and which have been overdue for six months or longer as of February.
“This fund is not much different from all the other programs out there, and it’s a drop in the ocean in terms of helping people who are struggling,” said Kim.
Additional reporting by Christine Kim, Choonsik Yoo and Joyce Lee; Editing by Kim Coghill