South Korea’s top fiscal policymaker and the chief of the International Monetary Fund have agreed that Asia’s fourth-largest economy needs to continue its current pump-priming policies in order to respond to external risks and to boost growth, the Ministry of Economy and Finance said Monday.
The finance minister also pledged his dedicated efforts to effectuate the government’s supplementary budget bill worth 6.7 trillion ($5.7 billion), which has been pending here since late April amid partisan feuds.
Deputy Prime Minister and Finance Minister Hong Nam-ki on Saturday met with IMF Managing Director Christine Lagarde on the sidelines of the Group of 20 meeting of finance ministers and central bank chiefs held over the weekend in Fukuoka, Japan, officials said Monday.
Deputy Prime Minister and Finance Minister Hong Nam-ki poses for group photograph on Sunday, the last day of the Group of 20 Finance Ministers and Central Bank Governors Meeting. (Ministry of Economy and Finance)
“(The Korean government) has drafted and submitted a 6.7 trillion won supplementary budget bill as part of its expansionary fiscal plan, and will continue to make efforts to obtain parliamentary approval as soon as possible in order to trigger economic revitalizing effects,” Hong said in the meeting.
During their meeting, Lagarde called for the establishment of a rule-based trade system, citing the current US-China trade tensions and their negative impact on the global economy.
She also said the IMF is seeking to secure or, if possible, increase its lending resources to counter instability in the global financial markets should it become necessary.
The minister’s emphasis on the budget bill was in line with the IMF’s earlier view that Korea needs to further expand the volume of its fiscal spending in order to attain its target growth rate of 2.6-2.7 percent amid prolonged slow growth and downside risks.
In March, the Korean mission of the IMF had recommended that Korea draft an extra budget equivalent to 0.5 percent or more of last year’s gross domestic product -- an amount that works out to almost 9 trillion won.
In consideration of that advice, the ministry allotted 6.7 trillion won in a proposed extra budget for this year and submitted the related bill to the National Assembly in late April, but its passage has been held back due to a boycott of parliamentary proceedings by the conservative main opposition Liberty Korea Party.
“We predict that (the budget bill) will have the effect of boosting (this year’s growth rate) by about 0.1 percentage point, if (the bill) passes the parliament within May,” the minister had said upon submitting the bill.
During his three-day stay in Japan, Hong also met with US Treasury Secretary Steven Mnuchin in a separate meeting on Sunday to call for positive US consideration in resolving the difficulties faced by small Korean companies due to US sanctions on Iran.
He did not, however, hold a separate meeting with his Japanese counterpart, Taro Aso.
At the G-20 roundtable, Hong stressed the importance of transparent monetary operations and optimized market-stabilizing actions amid global market volatility.
“The (impact of the) US-China trade conflict is spreading out to the economy in general, including sectors such as customs, exchange rates, technology,” he said.
“In order to prevent such influence from spilling over to emerging economies, it is crucial to reinforce policy cooperation (among G-20 nations) and to make practical pre-emptive actions.”
By Bae Hyun-jung (firstname.lastname@example.org)