The Korean government fully agrees with the International Monetary Fund (IMF) advice on the need to go more aggressive in fiscal spending to prop up the economy against worsening uncertainties from widening trade war between two superpowers, said deputy prime minister and finance minister Hong Nam-ki during his meeting with IMF Managing Director Christine Lagarde.

According to the Ministry of Economy and Finance on Monday, Hong met with Lagarde in Fukuoka, Japan, on the sidelines of the Group of 20 Finance Ministers and Central Bank Governors meetings.

He explained the government is trying hard to gain approval from the National Assembly on its proposal of 6.7 trillion won ($5.6 billion) worth supplementary budget plan to spur economic growth.

Hong emphasized on IMF’s role in upholding global free trade order through precise analysis on the current status of the global economy and proper policy recommendations. He also emphasized that the fund must secure enough finance to prepare for uncertainties in the global financial market. Lagarde responded that the fund is in talks with major member countries to maintain or raise its holdings in financial resources.

Lagarde also stressed the need to establish a rules-based trading system, as the negative impacts from the escalating trade tensions between the United States and China have been growing on the global economy.

In a briefing note to G20 finance ministers and central bank governors, the IMF warned that tit-for-tat trade friction between the U.S. and China would wipe out $455 billion in global gross domestic product next year, a loss larger than South Africa’s economy.

Separately, Hong sat with U.S. Treasury Secretary Steve Mnuchin on Sunday to discuss on foreign exchange issues and sanctions against Iran. Regarding the concerns on countervailing duties and currency manipulator labeling, Mnuchin said the most important criteria for the title of a currency manipulator is whether a country intentionally manipulates exchange rate to strengthen competitiveness. The U.S. Treasury Ministry retrained South Korea on its foreign exchange monitoring list last month.

Responding to the complaint from Hong on the difficulties of Korean small- and mid-sized firms caused by Washington’s sanctions against Iran, Mnuchin said he hopes the issue to be resolved amicably through close discussions between the U.S. and Korea.

By Chung Seok-woo and Choi Mira

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