The South Korean government and the Bank of Korea agreed on the necessity of utilizing the projected surplus tax revenue of 63.2 trillion won this year for public welfare areas such as housing, job creation, and financial support for low-income households. They also decided to implement market stabilization measures, including reducing the issuance of government bonds and emergency buybacks, if domestic bond rates rise excessively.
On September 30, Deputy Prime Minister and Minister of Economy and Finance Lee Hyung-il held an expanded macroeconomic finance meeting at the Government Complex in Seoul with Minister of the Office for Government Policy Coordination Park Hong-keun, Financial Services Commission Chairman Lee Ok-won, and Bank of Korea Governor Shin Hyun-song to discuss these response strategies.
This meeting was the first expanded macroeconomic finance meeting since Lee's appointment and was convened to review economic conditions and policy directions ahead of the National Assembly's deliberation of next year's budget, following the recent interest rate hike by the Bank of Korea.
Participants noted that while economic indicators such as exports and investments show positive trends, external uncertainties remain high due to rising interest rates in major countries and geopolitical risks. They also acknowledged the ongoing burden on the public and the need to address structural issues such as deepening polarization.
Regarding the revised tax revenue estimates announced during the meeting, there was consensus on the strategic use of surplus tax revenue in line with economic conditions. The Ministry of Economy and Finance projected that this year's national tax revenue would reach 478.6 trillion won, an increase of 63.2 trillion won compared to the supplementary budget.
Participants emphasized the need to use the surplus tax revenue to support three key social policies—housing, job creation, and financial assistance for low-income households—to help alleviate polarization and ensure that a swift economic recovery translates into public stability.
The potential for complementary action between fiscal and monetary policies was also highlighted. It was noted that if fiscal policy is directed towards supporting vulnerable groups and fostering future growth drivers, it could work in tandem with monetary policy. This approach is expected to contribute to raising potential growth rates and alleviating inflationary pressures in the medium to long term.
In the financial markets, the rising trend of domestic bond rates was identified as a major risk factor. The increase in bond rates is attributed to the rise in global rates due to higher oil prices and the tightening of monetary policies in major countries, compounded by domestic factors.
In response, the government decided to closely monitor trends in the treasury bond market and to take necessary measures, such as emergency buybacks and reducing the issuance of government bonds, if the rise in rates becomes excessive. Emergency buybacks involve the government repurchasing treasury bonds before their maturity. The plan is to utilize part of the surplus tax revenue for the reduction in bond issuance.
Participants agreed to maintain ongoing communication regarding macroeconomic, fiscal, and financial issues and to strengthen cooperation among authorities to ensure that each policy is implemented harmoniously.
* This article has been translated by AI.
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