This study determines appropriate analyzes policy issues in order to improve the system of government bonds issued by the South Korean government.
Korea maintains sound finance, compared to other developed countries. However, the overall fiscal balance shows a deficit, so the government should carefully decide when to increase financial resources by issuing national and public bonds because, Korea is currently dependant on government bonds for the national deficit. In order to determine the size of the government bonds, first the economic impact of previously-issued government bonds should be evaluated, and investment demands—such as the social overhead capital (SOC)—should be estimated.
In economically developed countries, citizens are paying huge economic costs due to financial deficits. A budget deficit caused by government bonds has a substantial effect on the overall economy, and generates high inflation. In terms of financial requirement, it appears that there is a significant finance demand to expand SOC, but the actual demand is affected by the size and operating methods of national and public finance management funds.
However, the current system of government bond issue seems to have many issues. Marketability and negotiability of government bonds are very low because they are difficult to manage systematically and effectively, due to the number of issuing agents. Also, there is no correlation between the current system of government bonds, the national budget and the monetary policy. Since absorption of government bonds is based on compulsory allotment, the lack of relationship causes losses to financial institutions and hinders the development of bond market. In addition, since the bonds issued are mainly short-term bonds, administration costs increase and the burden-sharing of government bonds between generations is weakened.
In order to solve these problems, the issuing agents of government bonds should be unified, and the organization responsible should be the Bank of Korea. It is necessary to organize the system so that government bonds can be issued according to the actual market interest rate. Furthermore, the government should extend the maturity date for national and public bonds, to standardize issue terms and to regularize the period of bond issuance.
Finally, plans to increase demand for national bonds should include the mandatory inclusion of the performance based products and the secondary reserve fund to be used for the prepayment for government and public bonds.
우리나라 국공채의 현황과 제도개선방안 연구(The research on current status and plans to improve South Korea’s government bond system)
서울 : 한국개발연구원
|Series Title; No||정책연구시리즈 / 93-20|
|Subject Country||South Korea(Asia and Pacific)|
|Subject||Economy < General|
|Holding||KDI; KDI School|