Pension Future Forum: "Deploying the National Pension to Stabilize the Exchange Rate Undermines Both Returns and Stability" (SBS Biz)
- #국민연금법
Experts have continued to express concern that mobilizing the National Pension Fund for won–dollar exchange rate stabilization—through measures such as extending the foreign-exchange swap arrangement and strategic currency hedging—will simultaneously undermine the fund's investment returns and stability and bring forward the date of fund depletion.
The Pension Future Forum, an association of pension specialists, convened a seminar today (the 5th) and declared that "the National Pension is not a source of liquidity for the government but an intergenerational compact secured by the people's right to subsistence in old age," affirming that the interests of contributors must be the paramount consideration.
In his presentation, Professor Hyun Jeong-hwan of the Department of International Commerce at Dongguk University argued that "using the National Pension Fund as an instrument of exchange-rate stabilization is inconsistent with its purpose and will simultaneously erode the fund's investment returns and stability while bringing forward the date of fund depletion."
He further noted that "the fundamental causes of the recent sharp depreciation of the won include the obligation to fulfill an annual investment commitment of approximately $20 billion in the United States, inflationary expectations stemming from fiscal expansion, and doubts about the adequacy and liquidity of foreign exchange reserves," adding that "greater transparency in the management of foreign exchange reserves, adherence to appropriate guidelines, a reporting obligation to the National Assembly, and a strengthening of the public character of those reserves are all required."
Professor Kim Hak-ju of the Department of Social Welfare at Dongguk University observed that "the core of the National Pension Fund's Investment Policy Statement (IPS) lies in 'maximizing long-term returns within permitted risk limits' and 'independence in fund management.'"
Professor Kim diagnosed the current fund management governance as vulnerable to the infiltration of policy objectives at the stages of agenda-setting, decision-making, and the assignment of accountability. To address this, he proposed the introduction of a dual-lock mechanism for policy-linked agenda items, the statutory codification of a principle requiring government fiscal compensation whenever investment returns are impaired, and a meaningful strengthening of the independence of fund management governance.
Regarding the extension of the $65 billion (approximately 95 trillion won) foreign-exchange swap agreement between the National Pension and the foreign exchange authorities, Yoon Seok-myeong, Honorary Research Fellow at the Korea Institute for Health and Social Affairs (KIHASA), noted that "even acknowledging the necessity of strategic currency hedging, it exposes considerable problems from the perspective of managing the National Pension Fund," adding that "this amounts to forgoing the returns that would have been earned had such measures not been taken."
Kim Dae-young, a tax accountant and advisory committee member of the National Assembly Special Committee on Pension Reform, likewise explained that "sacrificing contributors' expected returns in order to achieve the government's policy objective of defending the exchange rate constitutes a breach of the fundamental operating principle of 'maximizing contributors' interests in accordance with fiduciary responsibility.'"
