As nations across the globe grapple with a surge in borrowing costs, almost none enjoy the option now being eyed in South Korea: deploying a major new source of cash to simply cut back on selling debt.
Asia’s fourth-largest economy has already outlined plans to establish a Future Response Fund, using part of the nation’s extraordinary surge in tax revenue stemming from the artificial intelligence boom. Now, one of the country’s top policymakers is leaving open the possibility of reducing government borrowing in the event of bond markets coming under pressure.
Park Hong Keun, South Korea’s planning and budget minister, said in an interview with Bloomberg that the government could consider using the fund to further reduce bond issuance if yields surge or market conditions deteriorate.
While debate in France and the US is centered around different types of intervention in their bond markets, in Seoul, officials are already able to trim borrowing thanks to the revenue surge from South Korean semiconductor production.
For now, South Korea is sticking with a planned 12.5 trillion won ($9.5 billion) reduction in debt issuance next year, Park said. But if needed, the reserve fund is a resource, he indicated.