Korea Favors Prudent Approach
The South Korean government had talks with the International Monetary Fund (IMF) and the U.S. Department of Treasury over how to disclose its forex market intervention data. Although they failed to reach an agreement, the government made it official that it would conduct the disclosure with prudence.
Deputy Prime Minister Kim Dong-yeon, who stayed in the United States from April 19 to 21 (local time) for G20 financial ministers’ and IMF and World Bank meetings, talked over the matter with IMF chief Christine Lagarde and U.S. Treasury Secretary Steven Mnuchin during his stay in the U.S.
“The South Korean government is examining how to enhance the transparency of the local foreign exchange market,” the deputy prime minister said during his meeting with the U.S. treasury secretary on April 21, adding, “The government is going to make a prudent decision in view of its potential effects on the local forex market and the economy as a whole." He said Seoul would also take into account the G20 agreement, IMF recommendations, the Trans-Pacific Partnership, and various case studies. The U.S. Treasury Secretary remarked that the U.S. had a positive evaluation about the South Korean government’s efforts and talks would continue.
The meeting between the deputy prime minister and the IMF chief took place on April 19. There, Kim made similar remarks, explaining that the South Korean government’s prudent decisions would be based on the factors mentioned above. The IMF chief advised that the disclosure would contribute to the macroeconomic side of South Korea by enhancing the transparency of its economic policy and it would entail few side effects in view of the country’s forex and financial market conditions.
In short, the South Korean government failed to reach an agreement with Washington and the IMF on the matter. Their opinions are still different on the two key issues -- the timing and scope of data disclosure.
The South Korean government is likely to conduct the disclosure on a quarterly basis with an interval of three months or less. This is because the government is likely to apply the joint statement of the TPP agreement. In addition, it is planning to disclose the total purchase and sale values.
Meanwhile, the United States is demanding an interval of one month. Earlier, the U.S. let countries disclosing their data for the first time, such as Vietnam and Malaysia, disclose net foreign exchange purchase every six months with an interval of six months.
The South Korean government is expected to announce its decision next month after more talks with the U.S. and the IMF. Still, it is likely to make an independent determination on the key issues. “The disclosure will be gradual and the government’s basic stance, that is, minimal intervention and clear responses to significant market fluctuations, will not change at all,” said the Deputy Prime Minister.