Economy 2 MIN READ

UPDATE 2-S.Korea’s finmin signals extra budget unlikely to need major bond issuance

May 11, 2022By Reuters

Adds bond repayment plan, tax revenue

South Korea’s new finance minister indicated on Wednesday the government would issue few bonds, if any, to fund an upcoming supplementary budget aimed at defraying losses at small businesses due to COVID-19 restrictions.

“As for the funding, we have made all efforts to secure resources, including readjustment of existing spending plans and carried-over tax revenue surplus,” Choo Kyung-ho said at the beginning of a meeting with the ruling party.

Choo, appointed finance minister on Tuesday on the same day President Yoon Suk-yeol was inaugurated, made no reference to bond issuance as a funding source, in contrast to his previous remarks that bond issuance would be minimised.

A senior ruling party lawmaker said later the government has told his party that this year’s tax revenue projection would be raised sharply enough to fund the budget and even repay existing government bonds ahead of maturity.

“The government now estimates this year’s tax revenue would be some 53 trillion won ($41.56 billion) more than earlier projected,” People Power Party’s policy committee chief Sung Il-jong said on YTN channel.

“The government has reported (to the party) that it would use it in funding the budget and repaying some 8 trillion won worth of government bonds,” he added.

In the local bond market, the yield on the benchmark 10-year treasury bond KR10YT=RR extended its decline to as much as 11.6 basis points after the comment. It was now trading down 11.0 basis points at 3.293%.

Choo said the government would finalise the supplementary budget bill, widely expected to be about 35 trillion won ($27.4 billion), on Thursday and send it to the parliament on Friday for approval.

($1 = 1,275.3100 won)

(Reporting by Choonsik Yoo; Editing by Stephen Coates, Bradley Perrett and Sam Holmes)

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