South Korea’s foreign loans slightly increased in the second quarter of this year, reaching a record high. The related soundness indicators have continuously shown a favorable trend.
According to a report “Foreign Loan Trend and Evaluation at End-June in 2017” released by the Ministry of Strategy and Finance (MOSF) on August 24, the total foreign loans at the end of June stood at US$407.3 billion (459.43 trillion won), up US$1.7 billion (1.92 trillion won) from the first quarter.
Out of the US$407.3 billion (459.43 trillion won), the short-term foreign debt with a maturity of less than one year increased US$1.9 billion (2.14 trillion won) to US$117.3 billion (132.31 trillion won) compared to the previous quarter, while the long-term foreign debt with a maturity of more than one year decreased US$300 million (338.4 billion won) to US$290 billion (327.12 trillion won).
The government said its foreign loans slightly increased largely due to the fact that foreigners’ bond investment grew US$900 million (1.02 trillion won).
In fact, foreigners’ bond investment rose US$2.6 billion (2.93 trillion) owing to transaction factors but dropped US$1.7 billion (1.92 trillion won) because of non-transaction factors including the depreciation of the won against the U.S. dollar.
The exchange rate for Korean won to the U. S. dollar, which stood at 1,208.5 won at the end of last year, dropped from 1,161.1 won in the first quarter and then 1,139.6 won in the second quarter, down 2.1 percent from the previous quarter.
The nation’s foreign credit increased US$17.4 billion (19.64 trillion won) to US$830.5 billion (937.63 trillion won) compared to the previous quarter, reaching a record high. This was due to US$8.9 billion (10.05 trillion won) of the increase in debt securities investment from other financial institutions, such as insurance companies and securities firms, and non-financial companies, according to the government.
As the foreign credit showed a higher growth than foreign debt, the net foreign credit increased US$15.7 billion (17.72 trillion won) to US$423.1 billion (477.6 trillion won) compared to the previous quarter, reaching a record high.
Despite the increase in the foreign loans, South Korea’s foreign debt soundness and solvency indicators remained good. The ratio of short-term foreign debt to the total foreign debt stood at 28.8 percent, up 0.4 percent point from the previous quarter. However, it maintained at the low level.
In addition, the ratio of short-term foreign debt to foreign exchange holdings, which shows the ability of short-term foreign payment, also grew 0.1 percent point to 30.8 percent, remaining at the sustainable level.