The recent inclusion on the World Government Bond Index, a global benchmark for bond investments, proves South Korea is headed in the right direction in its efforts to improve its foreign exchange market, an official from the Finance Ministry said Monday.

On Oct. 9, the Financial Times Stock Exchange Russell announced that Korea has been added to the WGBI. The inclusion came more than two years after Korea was put on the watchlist in September 2022.

In the announcement, FTSE Russell stated that local market authorities have implemented significant initiatives to provide improved accessibility for the foreign exchange market to overseas investors.

“Korea has a vision of improving the foreign exchange market. Its efforts in advancing the foreign exchange market have been unique, and even unprecedented,” Jang Yeo-jin, director of the foreign exchange system division at the Finance Ministry, said at a press briefing.

“It is the first time to receive confirmation that the improvements are headed in the right direction.”

Over the past few years, authorities have introduced new measures to ramp up the foreign exchange market, such as allowing third-party foreign exchange and offshore investors' overdrafts of the Korean currency, the extension of won-dollar trading hours and the launch of connectivity with International Central Securities Depositories.

The initiatives are also related to the global stock benchmark Morgan Stanley Capital International index, as Korea has been pushing for an upgrade from "emerging market" to "developed market" status over the years.

“In terms of measures related to the foreign exchange market, we are almost there. But there are still measures that have to be reformed. With the experience of making it on the WGBI, the improvements for the MSCI upgrade can pick up pace as well,” Jang said.

Another official stressed that the WGBI inclusion also proves Korea’s strong commitment to maintaining fiscal soundness.

“When attending investor relations events held overseas, foreign investors ask the most about the fiscal soundness of Korea,” said Kwak Sang-hyun, director of the government bond policy division.

“The FTSE Russell would have never enlisted Korea if it had doubts about its fiscal plans. The inclusion was only possible because it was certain about the country's commitment to maintain fiscal discipline.”

While the WGBI inclusion is expected to draw in passive foreign funds worth over $56 billion and bring down financing costs, the ministry projects it will yield even more intangible benefits.

“Though the inclusion will be effective a year later from November 2025, Korea's status on the global financial market has already been elevated,” Kwak said.