Government bond sales to increase 28% in 2020

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Government bond sales to increase 28% in 2020

Korea plans to sell 130.2 trillion won ($87.4 billion) worth of government bonds in 2020, up 28.5 trillion won, or 28 percent, from this year’s estimated amount, the Finance Ministry said Monday.

It marked the sharpest annual growth since 2009, when the government hiked sales of government bonds by 63.1 percent, according to the ministry.

The government plans to refinance 59.3 trillion won worth of state bonds due next year, up 2.1 trillion won from 2018, the ministry said, adding that a net 70.9 trillion won worth of state bonds will be sold next year, up 26.4 trillion won on year.

So far this year, the government has sold a total of 101.7 trillion won worth of state bonds, according to the ministry.

About 58 percent of government bonds will be sold in the first half of next year, the ministry said.

Factoring in strong demand for the longest dated state bonds, the ministry plans to sell 50-year government bonds worth 4 trillion won next year, up 1 trillion won from this year’s estimated amount, while making 20-year and longer dated state bonds account for up to 40 percent of the total offering in 2020.

In 2016, the government floated its first-ever 50-year state bonds to gain extra leeway to execute financial policies.

The sharp hike in next year’s sales of government bonds came as the government seeks to reinvigorate the economy with expansionary fiscal spending.

Finance Ministry officials have dismissed worries that a hike in next year’s government bond sales may have an impact on bond yields but said the ministry will flexibly allocate bond issuance to minimize any fallout from the planned massive debt sale.

Earlier this month, the National Assembly approved next year’s state budget of 512.3 trillion won, up 9.1 percent from this year’s.

The ministry said it will allocate about 62 percent of the 2020 budget in the first half of next year to prop up the slowing economy.

Under the government’s expansionary fiscal policy, the fiscal deficit is estimated at 3.5 percent of the country’s GDP next year, compared with 1.9 percent for 2019.

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