FKCCI: "Even if Won Becomes a Key Currency, Reckless Government Bond Issuance Should Be Avoided"

Ruling and Opposition Presidential Candidates' 'National Debt Debate' Explanation

[Asia Economy Reporter Jin-ho Kim] The Federation of Korean Industries (FKI) stated on the 22nd that even if the Korean won is included as a key currency, maintaining economic fundamentals remains a very important issue.

On the same day, through a press reference material distribution, the FKI clarified the so-called 'government bond debate' that became controversial during the presidential candidate debate the previous day.

In the debate, Lee Jae-myung, the Democratic Party presidential candidate, argued with Yoon Seok-youl of the People Power Party and Ahn Cheol-soo of the People’s Party about the possibility of the Korean won being included as a key currency. Lee claimed, "There is a high possibility that we will be included among key currency countries," and argued that there is more capacity to issue government bonds, while Yoon and Ahn expressed doubts about this claim and voiced strong concerns about excessive government bond issuance.

The possibility of inclusion as a key currency country mentioned by Lee is known to have been quoted from the FKI’s press release distributed on the 13th.

At that time, the FKI stated that the Korean won could be included as one of the currencies composing the Special Drawing Rights (SDR) currency basket, which the International Monetary Fund (IMF) Executive Board is reviewing this year. SDR is a right that IMF member countries can draw upon without collateral during foreign exchange crises, and currently consists of five currencies: the US dollar, the euro of the Eurozone, the Japanese yen, the British pound, and the Chinese yuan.

Regarding the debate among the leading presidential candidates, the FKI pointed out in the press reference material on the same day that "even if the Korean won is included in the SDR, the issue of national fiscal soundness is a very important matter in terms of economic stability," and "the demand for won-based government bonds does not immediately increase just because of inclusion."

It added, "Since a key currency must be internationally recognized as a safe asset and have international payment and settlement functions, maintaining economic fundamentals is very important."

This explains that Lee’s emphasis on the capacity to issue more government bonds due to the Korean won’s inclusion as a key currency is unreasonable. The report’s content that the introduction of the won as a key currency is necessary in a way that positively affects the Korean economy was ultimately partially distorted by Lee.

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