Central Bank Chief: Exit Strategy Differs by Country

Bank of Korea Gov. Kim Chung-soo said Saturday that the timing of an exit strategy, including an interest rate increase, can differ by country.

In a keynote speech at the Global Alumni Forum organized by the Wharton School of the University of Pennsylvania at the Seoul Grand Hyatt, he said, “Given the differences in each country’s economic situations, the timing of implementing an exit strategy can be different.”

Kim seemed to imply that if Korea continues rapid economic recovery, it can implement an exit strategy ahead of more advanced economies such as European nations and the U.S. despite the fiscal crisis in southern Europe.

The governor also said Korea’s foreign reserves of about 280 billion U.S. dollars are not excessive. In his opening speech script for a conference marking the 60th anniversary of the Bank of Korea released Sunday, he said, “Emerging economies suffered from severe exchange fluctuations in the global and the European financial crises though they were not the causes of such crises,” adding, “To prevent a sudden outflow of dollars, we have expanded foreign reserves.”

“To this, some say we`ve accumulated an excessive amount of foreign reserves, but the global financial and European fiscal crises have proven such a claim groundless,” Kim said. “Many emerging economies suffered from a lack of foreign currency liquidity though they thought they had enough foreign reserves.”

weappon@donga.com