South Korea plans to start to compensate pandemic-hit small merchants from late October for their losses incurred by anti-virus restrictions, a senior government official said Friday.

The government set aside 1.03 trillion won ($873 million) to operate a state scheme to compensate small merchants for losses that have been generated since July due to state orders to shut down or suspend business over the pandemic.

"The government is making seamless preparation to provide compensation to the self-employed starting in late October," First Vice Finance Minister Lee Eog-weon told a policy meeting.

Small merchants and the self-employed have been hard hit by the COVID-19 pandemic as the toughest-ever virus curbs put restrictions on their business hours and people's private gatherings.

Since July 12, the greater Seoul area, home to half of the country's population of 52 million, has been under the toughest social distancing rules, which include business restrictions and a ban on private gatherings of three or more people after 6 p.m.

The government proposed a record high budget of 604.4 trillion won for next year to maintain expansionary fiscal spending. It allocated 1.8 trillion won to hand out as monetary compensation to merchants ravaged by the pandemic. (Yonhap)