Contingency Plan
The Korean government is reexamining its financial contingency plan to better deal with risks of four major countries (G4) – China, the US, Japan and EU. The current contingency plan was prepared in June 2013, when the global financial market underwent a taper tantrum. “Recently, the won-dollar exchange rate hit a 68-month high and the other financial indicators are showing signs of abnormality as well,” the government explained, adding, “We need to review the plan to better cope with concerns and crises in advance.”
In this regard, Vice Minister of Strategy and Finance Lee Chan-woo recently presided recently over a meeting in which participants discussed the necessity of adjustment of response by stage correlated with financial market risk levels. The contingency plan provides different responses with regard to the five levels of the risks and the government maintained the response to the highest level of risk for the last quarter of 2008.
Specifically, the government is looking to expand its three macroeconomic stabilization measures and sign more currency swaps earlier. At present, Korea is in currency swap agreement with the United Arab Emirates, China, Malaysia, Australia and Indonesia. The agreements with the United States and Japan expired in April 2009 and February last year, respectively.
At the same time, the government is reviewing the adequacy of its foreign exchange reserves scenario by scenario while trying to increase the amount of immediately disposable reserves. Deputy Prime Minister Yoo Il-ho said at the National Assembly on February 19 that Korea’s current foreign exchange reserves are sufficient to be prepared for predictable international financial instability.