Lee Chang-yong "Monetary and Fiscal Policies Must Move in One Direction... Tight Fiscal Policy is Desirable"

[Image source=Yonhap News]

Lee Chang-yong, Governor of the Bank of Korea, stated on the 21st that it is appropriate for the Bank of Korea's monetary policy and the government's fiscal policy to move in the same direction, and that it is desirable to operate fiscal policy in a tightening manner for the time being.

Governor Lee made this remark during a report to the National Assembly's Planning and Finance Committee in response to a question from Jin Sun-mi, a member of the Democratic Party of Korea, about "fiscal policy that must be realized alongside independent monetary policy amid a complex economic crisis."

Governor Lee explained, "Although there are various difficulties due to high interest rates in the current situation, it is most important that monetary policy and fiscal policy move in the same direction," adding, "I think it is desirable for fiscal policy to be tightening for the time being."

When Representative Jin responded, "I do not quite agree," and said, "Since fiscal policy is not influenced by the monetary policy stance during difficult times, it should be diversified to cover various areas," Governor Lee replied, "The overall fiscal policy should be tightening, but targeted support for vulnerable groups is necessary."

[Image source=Yonhap News]

Regarding the criticism from Han Byung-do, a member of the Democratic Party of Korea, that "the regulation requiring the Minister of Strategy and Finance to pre-approve the Bank of Korea's salary-related budget lowers the Bank's independence," Governor Lee responded, "From the perspective of independence, there are aspects that do not align with international standards."

Representative Han explained that since Bank of Korea employees must obtain prior approval from the Ministry of Strategy and Finance for salary-related expenditures, the rate of salary increases is low, which leads to decreased employee morale.

Representative Han said, "Last year alone, 23 people retired from the Bank of Korea," adding, "It used to be called a 'job of trust,' but recently, the morale of members has declined. The outflow of talented personnel negatively affects organizational morale."

However, Governor Lee said that the approval system for salary-related expenses at central banks "varies by country."

Governor Lee stated, "Considering the Bank of Korea as a quasi-public institution, someone must oversee the responsibility for salary-related expenditures," adding, "We need to examine whether it is appropriate to judge the Bank of Korea like other public financial institutions or to recognize the Bank's uniqueness."