Ministry of Finance and Economy

On August 24, Deputy Prime Minister and Minister of Finance and Economy Koo Yun Cheol met with the newly appointed President of the Asian Infrastructure Investment Bank (AIIB)* Zou Jiayi, who was visiting Korea, and discussed ways to advance cooperation between Korea and the AIIB. The visit marked President Zou’s first visit to an advanced donor country in Asia since taking office in January 2026, reflecting her strong commitment to strengthening cooperation between Korea and the AIIB.   *An international financial institution established in January 2016 to promote economic development and regional cooperation in Asia through infrastructure investment.   Deputy Prime Minister Koo noted that the AIIB has grown steadily over the past decade* and has now firmly established itself as a global multilateral development bank. He emphasized the crucial role of the new President at this important juncture as the Bank enters its next phase of development. In response, President Zou attributed the Bank’s development to Korea’s active contributions as one of the AIIB’s five largest shareholders and expressed her appreciation for Korea’s continued support and cooperation.   * Number of members: 57 in 2016 → 111 at present; 373 development projects totaling USD 72.4 billion approved.   Deputy Prime Minister Koo stressed the potential synergies in development projects from combining the technological capabilities of Korean companies with the AIIB’s financial expertise, and called for President Zou’s support in achieving tangible outcomes through cooperation with Korean companies. He also expressed his hope that the AIIB would expand the recruitment of Korean nationals at various levels and across different fields, from senior to working-level positions. President Zou expressed her commitment to further strengthening cooperation with Korea, which has extensive development experience and technological capabilities, across a range of areas, including technology-based infrastructure projects and personnel exchanges.   Please refer to the attache files. 

The Ministry of Finance and Economy convened the 159th Economic Development Cooperation Fund (EDCF) Management Committee (chaired by the Minister of Finance and Economy) in writing and approved the project for the establishment of an AI and digital technology training institute in Tanzania, along with amendments to the regulations on EDCF operation and management.   The project aims to build an advanced technology training institute in Tanzania offering four programs in AI, robotics, data analytics and the Internet of Things (IoT) to develop skilled professionals for the country’s AI and digital industries. The project will be supported by an EDCF loan of USD 170 million.   The project comprises the construction of educational facilities and a campus; the provision of AI training and hands-on learning equipment, including AI labs, IoT devices, robotics equipment, drones and 3D printers; the development of ICT and network systems; curriculum development; and support for operation and maintenance (O&M). In particular, Korea’s AI technologies and education models will be actively applied to the development of AI labs and high-performance AI training facilities* within the institute, as well as to support for institutional operations and capacity building for education personnel.   * A digital infrastructure facility integrating AI computing resources, high-bandwidth memory (HBM), and high-speed networking.   As the project will be financed through a tied EDCF loan, under which procurement is limited to Korean companies, the financing is expected to create opportunities for Korean companies in AI, edtech, construction and related sectors to enter the African market. Furthermore, as the Tanzanian government is currently planning follow-up projects, including the establishment of additional training institutes modeled after this institute and the development of a large-scale data center, the successful implementation of this project is expected to further expand overseas business opportunities for Korean companies.    Tanzania, for its part, is strategically fostering its AI and digital industries under its national development strategy, Vision 2050, with the goal of raising GDP per capita to USD 7,000 by 2050. The project is expected to train highly skilled professionals who will help drive Tanzania’s industrial development and economic transformation. The Korean government plans to continue supporting the institute’s successful launch and sustainable operation by linking the EDCF loan with other initiatives, including the Knowledge Sharing Program (KSP), the Global AI Hub, and multilateral development bank (MDB) trust funds.   Meanwhile, the Ministry of Finance and Economy plans to approve large-scale EDCF projects worth USD 100 million or more only after deliberation and resolution by the EDCF Management Committee, with participation from relevant government ministries, while further expanding the participation of private-sector experts throughout project implementation. In line with this approach, the government highlighted that, to ensure the successful establishment and effective operation of the AI and digital technology training institute, Second Vice Minister Huh Chang held discussions with private-sector experts in development cooperation and AI to directly seek their views and recommendations.   In addition, the government revised relevant regulations to enhance the transparency and fairness of EDCF projects while facilitating the implementation of the K-AI Package. The revisions provide a basis for the Korean government to propose projects to developing country governments after gathering input from relevant ministries, and also stipulate which feasibility studies are subject to approval and the criteria for such approval. The government also strengthened the EDCF framework by requiring an annual review of the appropriateness of the EDCF interest rate structure and the implementation of necessary measures.   With this approval, the government plans to further accelerate efforts to identify new projects under the K-AI Package and continue pursuing measures to strengthen the transparency and fairness of EDCF operations, including by promoting greater involvement of private-sector experts and relevant government ministries. Please refer to the attached files.   

On August 21, Deputy Prime Minister and Minister of Finance and Economy Koo Yun Cheol convened a joint Market Situation Review Meeting[1] at the Korea Federation of Banks building to review developments in the financial and foreign exchange (FX) markets and discuss policy responses.   At the meeting, participants focused in particular on the recent rise in long-term interest rates in major economies and its potential impact on Korea. They assessed that, amid continued uncertainty in the Middle East, a combination of factors, including increased government bond issuance across major economies and greater corporate bond issuance by global AI companies, has led to higher interest rates, particularly on ultra-long-term bonds. Against this backdrop, participants agreed to closely monitor developments in the domestic bond market and continue assessing the impact of the recent rise in long-term interest rates on domestic and global financial markets, borrowing costs for businesses and households, and the real economy. They also agreed to promptly formulate and announce support measures to ease the debt burden on small business owners and alleviate financial pressures on low-income and vulnerable borrowers, so as to prevent rising interest rates from imposing excessive strain on vulnerable borrowers.   Participants observed that the KRW/USD exchange rate, which had risen to the 1,550 won range in early July, has returned to the 1,300 won range for the first time in 11 months, supported by factors including a record-high current account surplus and easing foreign investor equity rebalancing. Given that factors exerting both upward and downward pressure on the exchange rate remain, including geopolitical tensions in the Middle East and monetary policy developments in major economies, they will remain vigilant and respond as necessary to market volatility.   Participants attributed the significant quarter-on-quarter decline in Korea’s net international investment position (NIIP) in the second quarter, announced on August 20, to an increase in the value of domestic equities held by foreign investors, driven by improved corporate performance and rising stock prices during the quarter. In particular, there was consensus that Korea’s external soundness remains stronger than ever, considering that net external assets in debt instruments, which represent fixed payment obligations, increased by USD 2.3 billion from the previous quarter and that the current account surplus reached a record high of USD 191.0 billion in the first half of the year.   As for household debt, it was noted that despite an increase in the overall amount, the household debt-to-GDP ratio has declined. However, given that the ratio remains high compared with major economies, the authorities agreed to continue efforts to manage household debt while ensuring that borrowers with genuine financing needs continue to have access to funding. They will also proceed with the previously announced measures concerning single-stock leveraged products as planned.   In light of continued uncertainty in the external environment and the growing interconnectedness of the macroeconomy and financial, FX, and asset markets, participants agreed to remain vigilant and maintain a robust monitoring and response framework centered on the Market Situation Review Meeting. [1] Chairman of the Financial Services Commission, Governor of the Financial Supervisory Service, and Deputy Governor of the Bank of Korea. Please refer to the attached files.