[Fact Check] Experts: "Is South Korea a Key Currency Country? Creditworthiness Not Met"

Yeo "Cited Federation of Korean Industries Distribution Materials"
Federation of Korean Industries "Conveyed Hopeful Message for SDR Inclusion to Prevent Economic Crisis"

[Image source=Yonhap News]

[Asia Economy reporters Ki-min Lee and Moong-won Moon] On the 21st, during the National Election Commission TV debate, Lee Jae-myung, the Democratic Party of Korea's presidential candidate, explained the appropriate scale of government bond issuance. When Ahn Cheol-soo, the People’s Party presidential candidate, asked, "Do you know the difference between a reserve currency country and a non-reserve currency country?" Lee replied, "Our economy is so strong that it is very likely we will be included among the ‘reserve currency countries.’"

In response, Ahn argued, "Non-reserve currency countries like South Korea face problems because foreign demand for government bonds is low." The Democratic Party’s campaign press team explained that they were quoting a press release distributed by the Federation of Korean Industries (FKI).

On the 13th, the FKI issued a press release titled ‘Need to Consider Inclusion of the Korean Won as a Reserve Currency,’ claiming that "South Korea is fully qualified to be included in the International Monetary Fund (IMF)’s Special Drawing Rights (SDR) currency basket, so the government needs to actively pursue this."

However, many experts believe that it is still difficult for South Korea to be included as a reserve currency country. Since a reserve currency is a currency that serves as the center of financial transactions and international settlements in the global foreign exchange market, it requires firm trust in the issuing country’s economic power and fiscal soundness. Considering the current international settlement share of the Korean won and South Korea’s credit rating, it is not easy to meet these conditions.

In the case of the yuan, some emerging Southeast Asian countries recognize yuan transactions due to China’s large share in global trade, but many agree that it has not yet achieved full reserve currency status compared to the dollar.

According to the Bank of Korea, the US dollar still holds an overwhelming influence, accounting for 70-80% of South Korea’s export-import settlements by currency, while the Korean won accounts for less than 10%.

A Bank of Korea official said, "It is desirable for the national management goal to be to become a reserve currency someday," but added, "To actually become a reserve currency, it is important to develop national credit ratings, trade balance, fiscal balance, and household debt in a sound manner."

Lee Sang-ho, former head of the FKI’s economic policy team who prepared the data, also explained, "The FKI proposed this because South Korea, as a non-reserve currency country, has recently seen a rapid deterioration in fiscal soundness, and due to soaring international raw material prices, the trade balance may continue to run deficits. This message aims to prevent an economic crisis caused by credit rating downgrades in advance by hoping for the inclusion of the Korean won in the SDR."

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