Lee Hyoung-il, deputy prime minister and minister of finance and economy, convened an expanded macroeconomic, fiscal and financial meeting at the Government Complex Seoul on Wednesday to discuss key issues in the macroeconomy, public finance and the financial sector. Park Hong-keun, minister of planning and budget, Lee Eok-won, chairman of the Financial Services Commission, and Hyun Song Shin, governor of the Bank of Korea, attended. It was the first such meeting since Lee took office.
Participants agreed that the excess revenue should be used strategically in line with economic conditions, given that a re-estimate released the same day showed national tax revenue this year is expected to come in 63.2 trillion won above the forecast made when the supplementary budget was drawn up, helped by strong semiconductor demand.
They noted in particular that treasury bond yields have kept rising as global rates climb on higher oil prices and a shift toward tighter monetary policy in major economies, compounded by domestic factors. The government said it will closely monitor the treasury bond market and, if the rise in yields proves excessive, carry out emergency buybacks while using part of the excess revenue to scale back future bond issuance.
The government can adjust actual issuance volumes within the ceiling approved by the National Assembly. The total treasury bond issuance ceiling for this year is 225.7 trillion won, including 105.6 trillion won in deficit-financing bonds. If the government uses part of the 63.2 trillion won in excess revenue to cut planned issuance, the reduced supply of bonds could ease upward pressure on yields from a supply-demand standpoint.
Separately from the issuance cuts, the government plans to conduct emergency buybacks depending on market conditions. An emergency buyback involves purchasing treasury bonds that have not yet matured with cash in the market and redeeming them early. It stabilizes the market by spreading out refinancing burdens.
The government will also channel the excess revenue into three core social policy areas closely tied to people's daily lives: housing, jobs and financial support for low-income households.
