Bank of Korea injects $9.7 billion to stabilize economy amid political unrest

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Bank of Korea injects $9.7 billion to stabilize economy amid political unrest

Published: 11 Dec. 2024, 18:51

PARK EUN-JEE
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Audio report: written by reporters, read by AI

Finance Minister Choi Sang-mok speaks during a meeting at the headquarters of Korea Federation of Banks in central Seoul on Wednesday. [YONHAP]

Korea’s central bank has executed 14 trillion won ($9.7 billion) worth of repurchase contracts to inject liquidity into the market while top financial policymakers reach out to foreign investors and counterparts to ensure stability.

The chain of actions came as the government is trying to minimize the impact that political unrest sparked by President Yoon Suk Yeol’s short-lived martial law declaration will have on the country’s economy.

Financial Services Commission Chairman Kim Byoung-hwan said that the Bank of Korea has been carrying out the repo arrangement worth 14 trillion won since Dec. 4, the day after the declaration.

To provide sufficient liquidity, the Bank of Korea allowed all financial institutions to sell their assets to the central bank, reversing its previous stance of limiting such transactions to certain banks and brokerages.

The main Kospi index rebounded on Wednesday by 1.02 percent to close at 2,442.51, after fluctuations that peaked on Dec. 9, when it plunged by 2.78 percent. On Dec. 4, it posted a 1.44 percent decline, a margin that is widely considered relatively modest.

Finance Minister and Deputy Prime Minister Choi Sang-mok and U.S. Treasury Secretary Janet Yellen reaffirmed the strong alliance between Korea and the United States during a video conference on Tuesday.

They discussed the ongoing unrest and evaluated economic and financial market conditions during the call.

Yellen expressed her “appreciation” to Choi for the close communication between the two countries, reiterating the strength of the U.S.-Korea alliance that she said is rooted in shared democratic values, according to the ministry.

Yellen also expressed hope that cooperation between the two nations would continue in the future.

In response, Choi emphasized that Korea's democratic processes remain intact and assured the secretary that public safety and order are being maintained.

He noted that all national systems, including political and economic operations, are functioning normally, leaving no room for confusion.

Choi also highlighted the stability of the country's economic framework and the robust functioning of its emergency response systems.

The minister said Wednesday that the government would deploy all available “policy tools” to mitigate potential economic impacts stemming from anticipated policy changes under the incoming U.S. administration, with a plan to announce measures to strengthen supply chain network next week.

Concerns have been rising over potential shifts in U.S. trade policy, which could negatively impact Korea's export-driven economy as the Trump administration prepares to take office in late January.

“With the inauguration of the new U.S. administration just 40 days away, we are facing an extraordinary time that requires extraordinary measures,” Choi said during a meeting with economy-related ministers.

He noted plans to inject funds into stabilizing supply chains, particularly in key sectors such as semiconductors and batteries, and implement a comprehensive customs policy package.

BY PARK EUN-JEE, YONHAP [[email protected]]