The Ministry of Unification said that these funds will cover the costs of the visit, which will include accommodation and food for North Korea's cheering squad, orchestra, taekwondo performers, as well as for journalists and other supporting personnel. Combined, they make a group of 424 North Koreans.
South Korean President Moon Jae-in had invited North Korea athletes, supporters and officials to the Olympics in an attempt to lower months of tension between Pyongyang, Seoul and Washington over North Korea's nuclear and missile programs.
The final number for the total payment will be disclosed at a later time, said ministry spokesman Baik Tae-hyun in a briefing.
Costs of hosting the high-level official delegation which included Kim Yo Jong, the sister of North Korean leader Kim Jong Un, were paid for separately from the government budget, Baik added without disclosing details.
The International Olympics Committee will foot the bill for 22 North Korean athletes who are also in South Korea.
Travel between the two Koreas has been impossible without the approval of both governments since the 1950-53 war that divided the peninsula and ended in a truce, rather than a peace treaty.
Wednesday's number far exceeds the 1.35 billion won that was used to pay for the 650 North Koreans who visited South Korea in 2002 for the Asian Games in the port city of Busan.
The smaller amount in 2002 was partly due to the North Koreans' cheering squad staying and eating on the ferry they had arrived in, a ministry official told Reuters, speaking on condition of anonymity.
The higher number was also attributed to inflation. Of the total 2.86 billion won budget, about 1.2 billion won will be used for accommodation and food, the official added. Roughly 1 billion won will be used to pay for entrance fees for Olympic venues, and 100 million won has been set aside for transportation costs.
Most of the North Koreans stayed at luxury hotels in Seoul and near the Olympic venue, including the five-star Grand Walkerhill in western Seoul that has previously hosted American celebrities such as Paris Hilton and Michael Jackson.
The budget for the North Koreans' stay will be taken from the Inter-Korean Cooperation Fund, part of the Unification Ministry's spending budget. The fund was created in 1991 for North Korea-related expenditure, and its total 2018 budget is 962.4 billion won.