The country’s top economic policymaker and central bank chief met last week to affirm the need for a proper policy mix to cope with growing risks facing South Korea’s economy as it works toward a full recovery. A statement issued after the meeting between Finance Minister Hong Nam-ki and Bank of Korea Gov. Lee Ju-yeol said it was important to ensure a “sophisticate harmony” between fiscal and monetary policies.

The gathering, the first of its kind since December 2018, came amid rising concerns that the government’s expansionary fiscal policy may be out of sync with the central bank’s move toward monetary tightening.

A day before Hong met with Lee on Friday, the Cabinet passed a bill on this year’s second supplementary budget worth 33 trillion won ($29 billion). The additional spending plan, which is subject to parliamentary approval, is designed to fund another round of COVID-19 relief aid package for people in the bottom 80 percent income bracket and small merchants hit harder by the pandemic.

Last month, Lee said the central bank was ready to begin raising its key interest rate “within this year,” stressing the need to normalize its easy monetary policy in an orderly manner amid the economic recovery. The BOK slashed the rate by a combined 0.75 percentage points between March and May 2020 to a record low of 0.5 percent to help bolster the pandemic-hit economy.

Upon its recent unveiling of the economic policy plan for the second half of the year, the Ministry of Economy and Finance revised up its 2021 growth outlook for Asia’s fourth-largest economy to an 11-year high of 4.2 percent from its previous estimate of 3.2 percent.

During their meeting, Hong and Lee shared the perception that the country’s economy was fast recovering from the pandemic but the recovery was uneven across sectors and potential risks existed, such as growing financial imbalances.

Economic policymakers in the government have downplayed concerns about an emerging divergence between fiscal and monetary policies. They insist it should rather be regarded as a sort of policy mix, in which expansionary fiscal policy is pursued to support people vulnerable to the fallout from the pandemic and monetary policy focuses on easing financial imbalances.

But their argument is seen by critics as a nonsensical justification of reckless fiscal expansion by President Moon Jae-in’s administration. Counting in the planned extra budget, annual government spending is set to exceed 600 trillion won for the first time this year, an increase of nearly 200 trillion won from 2017, when Moon took office.

Korea’s national debt is projected to increase from 660 trillion won to more than 1,000 trillion won over the cited period. The ratio of national debt to gross domestic product, which stood at 36 percent in 2017, is estimated to be close to 50 percent, the critical level that could prompt global credit appraisers to consider downgrading the sovereign credit rating of a country.

The Moon administration has continued to expand fiscal expenditure to offset the negative effects of its ill-conceived policies such as the income-led growth drive. The outbreak of COVID-19 here early last year has precipitated the growth in spending.

The government and the ruling Democratic Party of Korea seem poised to even further increase spending to win the hearts of voters in the run-up to the presidential election in March.

There is speculation among market watchers that Finance Minister Hong, who doubles as deputy prime minister for economic affairs, sought to use his latest meeting with the BOK governor to put tacit pressure on the central bank to refrain from raising rates. Rate hikes may not help draw voter support but are essential for preempting potential risks from elevated inflation and financial imbalances.

Korea’s consumer prices rose beyond 2 percent, the long-term inflation target set by the central bank, for three consecutive months through June. The second-quarter growth in consumer prices reached a nine-year high of 2.5 percent.

Excess liquidity floated to help contain the fallout from the pandemic has bloated home and stock prices with debts owed by households and companies growing at a steep pace.

Injecting more money at the expense of aggravating fiscal soundness could run the risk of getting inflationary pressure and asset bubbles to spin out of control. What is needed now is a coherent policy mix that could prevent the country’s economy from being drawn into this disruption.