[Exclusive] Bank of Korea Prints Money for 40 Trillion Won Loans, This Is Why It's Called 'Daehan Debt Nation'

Record KRW 39.9325 Trillion in Won Loans Last Month
183.5% Increase in 4 Years...Central Bank Independence Controversy
IIF "Korea Ranks 1st in Household Debt to GDP Ratio"

[Asia Economy Reporter Jang Sehee] It has been revealed that the amount of funds printed by the Bank of Korea and lent to small and medium-sized enterprises approached 40 trillion won as of October this year. This was largely due to the significant increase in the issuance capacity during the COVID-19 response. In particular, with the presidential election next year approaching, the ruling party is strongly pushing for an expansion of the Bank of Korea's issuance capacity, raising concerns that not only the economy, such as inflation, but also the independence of the central bank could be compromised.

According to data received from the Bank of Korea by the office of Choo Kyung-ho, a member of the National Assembly's Planning and Finance Committee from the People Power Party, the amount of won loans issued by the Bank of Korea through its issuance capacity was 14.0859 trillion won in 2018, the year following the inauguration of the Moon Jae-in administration. Since then, it has gradually increased, reaching 39.9325 trillion won last month. This represents a sharp increase of 183.5% over the past four years.

Especially during the COVID-19 response, the Bank of Korea's cash issuance increased significantly. As of October, it supported 3.56 trillion won to the Special Purpose Vehicle (SPV) for corporate bonds and commercial paper purchases, and 37.4 trillion won in financial intermediary support loans. Despite maintaining an ultra-low interest rate policy, the central bank continuously injected money as the economy failed to recover.

Reliance on the Bank of Korea's issuance capacity not only negatively affects the economy by stimulating inflation but is also fatal to the independence of the central bank. However, the ruling party is emphasizing the Bank of Korea's issuance capacity ahead of next year's presidential election. Choi Bae-geun, a professor of economics at Konkuk University and policy coordination director for Lee Jae-myung's Democratic Party presidential campaign, has stated, "The government should issue won-denominated government bonds with maturities of 30 to 50 years at 0% interest and have the Bank of Korea purchase them."

Assemblyman Choo said, "Every time the Lee campaign claims to mobilize the Bank of Korea's issuance capacity for money printing populism, it is shocking whether the independence of the central bank is even considered. In a situation where global inflation concerns are growing, if free money is distributed, our economy will inevitably fall into ruin," he pointed out.