The amount of loans South Korea’s central bank provided to private and public corporations by minting new cash has reached the highest level in 15 and-a-half years.
The central bank said Tuesday that the amount reached 13-point-16 trillion won as of August, up 64-point-seven percent from last year, according to Korea’s (KBS WORLD) website.
The figure exceeds the 13 trillion won recorded in November 2009 in the wake of the global financial crisis. But the amount hasn’t reached the 15 trillion recorded in February 1999 in the aftermath of the Asian financial crisis.
The increase in BOK newly minted cash loans to small-and-medium-sized enterprises (SMEs) and assistance to the Korea Finance Corporation, which also provides loans to SMEs, is part of efforts to indirectly provide liquidity to the market. To offset the effect of such issuance of new currency, the central bank sells monetary stabilization bonds, but those could damage the national economy in the long run.
Oh Jung-geun, president of the Asia Finance Society, said that many government officials are still not free from the age-old practice of using BOK money as if it were their own. He said it is worth considering a limit to the government’s dependency on the currency-issuing power of the BOK by subjecting it to parliamentary approval.