Credit: Public domain.
Because of struggling economy and Yoon Suk-yeol 윤석열 administration’s tax cut, South Korea’s tax receipts have been plummeting for two years in a row, resulting in budget cuts in essential areas. (See previous coverage, “Local Governments Running Out of Money.”) The latest victim of budget cuts is the Foreign Currency Stability Fund 외국환평형기금, the reserve fund that the Korean government uses to stabilize swings in foreign currency exchange rates.
On September 8, Ministry of Strategy and Finance 기획재정부 said that the FCSF for 2025 will be approximately KRW 140t (USD 95b), a reduction of KRW 64.8t (USD 48.9b) from last year. The Yoon administration faced criticism last year for taking money out of FCSF to plug the gap in its budget deficit. The reduction is contrary to MSF’s own forecast of the international economy in 2025, in which foreign currency exchange rate will undergo significant swings because of geopolitical uncertainties.