Why was Korea's WGBI inclusion delayed until April next year?

Deputy Prime Minister and FInance Minister Choi Sang-mok, second from left, speaks during a meeting at Seoul Government Complex in Gwanghwamun, Wednesday. Yonhap

By Lee Kyung-min

• Published Apr 9, 2025 4:00 PM KST
• Updated Apr 9, 2025 6:10 PM KST

Korea’s inclusion in the World Government Bond Index (WGBI), operated by the London-based FTSE Russell, was delayed from November to April next year, the finance ministry said Wednesday.

The five-month delay is said to have centered on growing concerns over the domestic financial market conditions among Japanese investors, a group with a significant bond market influence, according to market watchers.

In addition, a bigger culprit appears to be months of political turmoil from former President Yoon Suk Yeol’s Dec. 3 martial law declaration and ensuing impeachment proceedings, they said.

The assessment is underpinned by Korea’s export-reliant economy extremely vulnerable to U.S. tariff shocks, as evidenced in part by the Korean currency crashing to nearly 1,500 won relative to the U.S. reserve currency.

Equally concerning is a series of downward revisions to the country’s economic growth forecast for this year.

Wednesday’s development pushes back the much-anticipated series of benefits. They include the inflow of foreign funds of up to 90 trillion won ($60 billion), stabilization of the Korean currency and lower government bond funding costs.

The last factor will lead to limited fiscal room for the authorities amid rising need of debt-financing brought on by years of deficit in government revenue.

According to the Ministry of Economy and Finance, FTSE Russell, the global index provider, said the rescheduled timeline was “reflective of several factors.”

It mentioned the feedback that “additions of monthly tranches rather than quarterly tranches would offer an additional element of ease and simplicity for portfolio managers.”

The FTSE Russell also said index users have “indicated that they are able to add the full exposure of Korea over a condensed time period if sequential monthly tranches are used.”

Still, it said the full inclusion will be “on track to be completed by November next year.”

“We commend the commitment of Korean market authorities in their continuation of initiatives which incorporate the practical feedback of international market participants to align their market with the highest standards for global bond investing,” the index operator said in a statement.

“The refinement to the implementation approach in the FTSE WGBI further ensures a frictionless index inclusion, based on demonstrated close collaboration amongst the global investment community," it said.

The ministry’s International Finance Bureau Director General Kim Jae-hwan said no unnecessary speculation should be drawn from this, since the date of full inclusion remains the same.

“The inclusion date has been pushed back, but the date of full inclusion has not,” he said.

“The only change is that the inflow of funds will occur on a monthly basis instead of quarterly basis. Had the index operator concluded that the political factors had played an outsized role, the date of full inclusion would have been postponed," Kim said.

The WGBI adjustments are not uncommon, the ministry said, as illustrated by the case of China.

“China’s complete inclusion took three years, longer than the previous plan of one year,” he said.