Finance Minister vows vigilance, concerted actions amid rising uncertainty

Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho. [Photo by Yonhap]

The South Korean government will closely monitor any market uncertainties that may be triggered by the recent policy move by the U.S. Federal Reserve, according to Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho on Thursday.

“As global economic uncertainties expand due to the possibility of the prolonged high-interest rates and rising international oil prices, we will closely monitor the market situation with even greater caution and take timely countermeasures in accordance with contingency plans when necessary,” Choo said in a meeting in Seoul.

The meeting took place shortly after the Fed announced its policy rate.

The Fed held the U.S. benchmark rate unchanged in the 5.25 - 5.50 percent range on Wednesday, local time. Fed Chair Jerome Powell hinted after the meeting that the policy makers’ board will maintain a tightening policy “until we’re confident that inflation is moving down sustainably toward our objectives.”

Global financial markets interpreted the latest Fed move as hawkish, leading to a decline in stock prices and an increase in interest rates and the dollar index.

Choo specifically mentioned the operation of a daily liquidity monitoring system to prevent excessive funding competition due to the maturity of high-interest rate deposits in the fourth quarter, as well as increased flexibility for bank liquidity regulations.

He further stated the possibility of government intervention when necessary to bolster liquidity and stabilize the market by utilizing corporate bond and commercial paper (CP) purchase programs, which are available over 30 trillion won ($22.4 billion).

Concerning the domestic financial market, he stated that the government sees it as fairly stable.

“Foreign investment in domestic securities continues on a steady trend, and the won-dollar exchange rate is relatively stable compared to other major countries. The stock and bond markets are in good shape as well,” Choo said.

Regarding concerns over the project financing (PF) sector, he said, “Support is provided for businesses that can be normalized, including new funding and maturity extensions, and businesses with no viability are being restructured, resulting in a gradual decrease in PF loan delinquency rates and a gradual easing of risks.”

Loans to self-employed individuals and small business owners are also improving, according to Choo, with the overall target debt decreasing to 76 trillion won from the initial 100 trillion won.

Citing the maturity extension until September 2025, with repayment deferral for up to 5 years until September 2028, he dismissed concerns about any financial stresses among self-employed individuals in September.

Regarding the second-tier financial sector, Choo also implied positive signals.

“Although delinquency rates have increased somewhat rapidly in the wake of interest rate hikes, they are being managed stably with a recent decrease in new delinquencies and a slowing rate of delinquency rate increase,” he said.