Reduction in Short-Term Treasury Bond Issuance... Emergency Buyback if Necessary

98% Fiscal Execution Rate Target This Year
4th Quarter Plan to Execute 126.5 Trillion Won

Ando-geol, 2nd Vice Minister of the Ministry of Economy and Finance. (Photo by Ministry of Economy and Finance)

[Sejong=Asia Economy Reporter Moon Chaeseok] The government has decided to reduce the issuance volume of short-term government bonds starting next month and, if necessary, undertake emergency buybacks to respond to volatility in the government bond market. This year, the central fiscal budget aims for a record-high execution rate of 98%, pushing for total expenditures of 600 trillion won, with plans to execute more than 126 trillion won in the fourth quarter.

On the 28th, the Ministry of Economy and Finance held a Fiscal Management Strategy Committee meeting at the Korea Trade Insurance Corporation in Jung-gu, Seoul, chaired by Second Vice Minister Ando Geol, to discuss these matters. Vice Minister An stated, "In the November government bond issuance plan to be announced today, we will boldly reduce and adjust the issuance volume, focusing on short-term bonds that have recently shown excessive volatility." He added, "We plan to closely monitor future government bond market trends and proactively stabilize the market through timely emergency buybacks and policy coordination with the Bank of Korea if necessary."

On the previous day in the Seoul bond market, the closing yield on 3-year government bonds was 2.044% per annum, marking the highest level in over three years since October 16, 2018, when it was 2.048%. From January to September this year, 151.5 trillion won worth of government bonds were issued, reaching 81.3% of the annual issuance limit. The government evaluated that the issuance volume was absorbed stably, with bid rates approaching 300%, and foreign investment increased to an all-time high. However, since September, concerns over inflation and the normalization of domestic and international monetary policies have led to synchronized global interest rate hikes, resulting in increased volatility and sharp rises in government bond yields.

Furthermore, Vice Minister An emphasized, "The fourth quarter is a time to consolidate available policy capabilities to achieve this year's economic growth target," adding, "We will focus on improving fiscal execution rates and strengthening investments in public institutions and private investment projects." The government plans to execute total expenditures of 600 trillion won this year, aiming for a record-high execution rate of 98%. This amount is 50.5 trillion won higher than last year. To this end, in the fourth quarter, the government plans to execute more than 126.5 trillion won, an increase of 11.7 trillion won compared to 114.8 trillion won in the fourth quarter of last year.

Public institution investments will exceed 19.5 trillion won in the fourth quarter, an increase of 2.1 trillion won compared to the same period last year, to achieve this year's target of 64.3 trillion won. The government plans to focus on managing investments related to housing stability support such as land acquisition and construction costs for the 3rd phase new towns by Korea Land and Housing Corporation (LH), household normalization and corporate recovery support from Korea Asset Management Corporation (KAMCO) for overcoming COVID-19, expansion of social infrastructure such as railroads by social overhead capital (SOC) public enterprises, and investments in eco-friendly, energy, and safety facilities like power and gas by power generation public enterprises.

Private investment projects will be managed to ensure the smooth achievement of the ongoing project investment plan worth 3.5 trillion won. Key projects under close management include the Icheon-Osan Expressway and the first phase of the double-track subway line from Yongsan to Gangnam on the Shinbundang Line. The government plans to expedite preliminary feasibility studies and other preparatory procedures to discover new investment projects initially targeted at 13.8 trillion won.

Regarding the National Assembly’s Budget and Accounts Special Committee’s review of next year’s budget starting on the 5th of next month, Vice Minister An stated, "We will thoroughly prepare for the National Assembly’s budget review by proactively identifying and reviewing budget increase or decrease requirements arising after the submission of the government budget on September 3, which supports phased daily recovery measures, expands quarantine infrastructure, and provides support for small business damages."

Meanwhile, to transition to a hydrogen economy, the government has allocated a related budget of 1.3 trillion won next year, a 54% increase from this year, to expand core infrastructure in three major areas: hydrogen production, storage and transportation, and utilization. The government aims to supply 200,000 hydrogen vehicles and establish 450 hydrogen charging stations by 2025, increasing purchase subsidies and promoting institutional improvements.

This content was produced with the assistance of AI translation services.