A Record High Again
South Korea has US$460.8 billion more money to be paid by foreign borrowers than it must pay back.
According to the Bank of Korea (BOK) on May 30, net external credit (net credit minus net debt) recorded US$460.8 billion as of the end of March this year. The figure increased by US$4.2 billion from a year earlier, the highest in history. The previous record high was US$456.7 billion at the end of last year, but a new record high has been reported in three months.
The net credit reached of US$894.7 billion, repeating an all-time high for the fifth consecutive quarter since last March. The short-term credit with maturities of less than one year was US$588.5 billion and the long-term credit with maturities of one year or more was US$314.2 billion, up by US$9.3 billion and US$9.9 billion, respectively, compared to the figures of the end of last year.
Foreign debt climbed to US$433.9 billion, up US$15.1 billion from three months earlier. Short-term foreign debt and long-term foreign debt recorded US$20.5 billion and US$313.4 billion, respectively. The figures increased by US$4.6 billion and US$10.5 billion, respectively, from the end of last year.
The ratio of short-term foreign debt to total foreign debt amounted to 27.8%, while the ratio of short-term foreign debt to reserved assets (foreign exchange reserves) stood at 30.4%, up by 0.1 percentage point or 0.6 percentage point, respectively from the end of last year.
The ratio of short-term foreign debt to the reserved assets is the indication of stability in the event of a financial crisis. This figure soared to 657.9% at the time of the Asian financial crisis at the end of 1997 and was 79.3% at the end of September 2008 when the global financial crisis hit the globe. Since then, it has gradually declined and it currently remains at 27~30%.
As of the end of March, foreign financial assets recorded at US$1.49 trillion, while foreign financial debt stood at US$1.218 trillion, up by US$41.6 billion and US$13.4 billion each over three months. Both foreign financial assets and debts reached an all-time high for the fifth consecutive quarter since last March. Net foreign financial assets (NetIIP), which subtracted external financial debts from foreign financial assets, stood at US$276.5 billion.
When it comes to foreign financial debts, foreign investment in debt-type bonds increased by US$10.2 billion. In particular, the investment balance of the government’s general debt-type bonds such as treasury bond, most of which are denominated in Korean won, climbed by US$4.4 billion, posting a record high of US$82.2 billion.
"Given the increase in foreign investment in won-denominated bonds, the reversal of interest differential between the domestic and foreign rates doesn’t’ seem to have impacts,” said an official of the Bank of Korea.