South Korea is set to issue more foreign exchange stabilization bonds next year, the Finance Ministry said Monday, a move that comes amid worries the ongoing financial market turmoil will likely be sustained for the time being.

The government plans to set the limit for foreign currency-denominated foreign exchange stabilization bonds at $1 billion and that for government bonds for foreign currency market stability at 18 trillion won ($15 billion) next year, up 2 trillion won from 2011, according to the finance ministry’s 2012 plan for bond management.

The plan drives up the total limit of the bond issuances to a record 19 trillion won next year, when calculating the Korean won at 1,070 won against the U.S. dollar.

The increase comes due mainly to a rise in the limit for government bonds for foreign currency market stability. After peaking at 17.3 trillion won in 2004, the figure has remained high and reached 16 trillion won for 2010-2011.

“The need to secure financial sources for market stability has increased amid the foreign currency market’s growing volatility.

The move comes on the increased possibility of a rise in capital flows next year amid the global financial market’s uneasiness,” a ministry official said.

Meanwhile, the government has been lowering the limit for foreign currency-denominated foreign exchange stabilization bonds.

After hitting $6 billion in 2009, the limit has trended lower to $1 billion in 2011.

South Korea has not issued foreign currency-denominated foreign exchange stabilization bonds since issuing $3 billion worth of such bonds in 2009.

The government is likely to refrain from issuing those bonds this year, given South Korea’s record-high foreign exchange holdings, according to a ministry official. 

(Yonhap News)