Prime Minister, “Call Rate Freeze is Undesirable”

On September 10, Deputy Prime Minister and Minister of Finance and Economy Lee Hun-jae raised the needs for a further decrease in the call rate, saying, “I regret the decision (regarding the call rate freeze decided by the Monetary Board of Bank of Korea (MBBK).” At the regular briefing at the Gwacheon Government Complex on the same day, the prime minister stated his opinion by saying, “I respect MBBK’s decision, but it shows too much concern for price instability.”

Regarding the recent tax reduction policy agreed between the ruling party and the government, Lee said that he couldn’t refuse the tax reduction proposal because the government needs to communicate with political circles about requesting tax reduction, and that there is some pressure to reduce oil taxes.

In regards to the recent diffusion of skeptical opinion for this year’s five percent growth prospect, Lee stated that our economy can grow by five percent unless international oil prices rises to $40 per barrel.

On the topic of the disciplinary punishment for the CEO of Kookmin Bank Kim Jung-tae, Lee restrained his tongue, saying, “That’s none of my business.”

Regarding the debate for the denomination which is changing the monetary standard of Korean won, Lee felt that it is desirable for political circles not to raise this issue because it is highly likely to undermine their real intentions if they do debate it.

Following, Prime Minister Lee said that Korea’s affiliation with the Inter-American Development Bank is determinative and is expected to cost about $200 million in entrance fees.

In the meantime, at the speech hosted by the Korean Institute of Finance on the same day, Lee criticized financial circles, saying, “Because of over-avoidance of risks by financial firms, their fund intermediation functions have been reduced, and corporate banking functions have been missing.” In addition, he stated, “The government will not forcibly intervene in the financial market for stability. Instead, in a critical moment, the government will do something on a completely market-friendly basis even though one of the financial firms goes bankrupt.”

*“Call rate” is an interest rate traded among financial firms with maturity of less than or equal to 30 days.

Jong sik Kong Seung-Jin Kim kong@donga.com sarafina@donga.com