Vice Minister of Economy and Finance: "Do Not Agree with Bank of Korea's Direct Purchase of Government Bonds"

Concerns Over Side Effects Such as Fiscal and Monetary Policy Constraints and Rapid Inflation Surge

[Image source=Yonhap News]

[Asia Economy Reporter Jang Sehee] The government has expressed opposition to the Bank of Korea directly purchasing government bonds to secure funding for compensation for losses suffered by self-employed individuals and small business owners.

On the 24th, Kim Yong-beom, the 1st Vice Minister of Strategy and Finance, stated at the regular briefing of the 30th Emergency Economic Central Countermeasures Headquarters meeting held at the Government Seoul Office that he "does not agree" with the Bank of Korea's plan to directly acquire government bonds.

Vice Minister Kim said, "The government's position is that the central bank's direct purchase of government bonds requires caution due to concerns about side effects such as a decline in external credibility, constraints on fiscal and monetary policies, and rapid inflation," adding, "There is a risk that the controversy over monetizing government debt could lower external credibility, leading to a downgrade of the national credit rating and capital outflows."

He also explained, "It could act as a negative factor that weakens the government's commitment to fiscal soundness and undermines fiscal discipline," and "By causing an increase in the money supply, it could harm price stability and limit the effectiveness of monetary credit policies due to excessive liquidity growth."

He further stated, "If a temporary imbalance in government bond supply and demand occurs due to an increase in bond issuance, it is appropriate to purchase government bonds through the secondary market."

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