Korea's New Foreign Credit Records All-time High

South Korea’s short-term foreign debt ratio hit 31.8% in the third quarter of this year, the highest level in three years and three months.

Amid growing concerns over a capital outflow due to a reversal of interest rates between Korea and the U.S., Korea’s short-term foreign debt ratio, a key indicator of a country’s financial soundness, hit 31.8% in September this year, the highest level in three years and three months.

According to Korea’s international investment table at the end of September 2018, which was released by the Bank of Korea (BOK) on Nov. 22, Korea’s ratio of short-term foreign debts to foreign currency reserves marked 31.8% in the third quarter, up 0.5% percentage points from the previous quarter. This was the highest level since 32.2% in the second quarter of 2015. Although the short-term foreign debt ratio is still low at the moment, it has been on the rise every quarter since 29.8% in the fourth quarter of last year.

The proportion of short-term foreign debt to Korea's total foreign debt also rose by 0.1 percentage point from the previous quarter to reach 28.5%. The ratio has also been on the rise for the third consecutive quarter since the end of last year.

Korea's net foreign credit (foreign credit minus foreign debt) amounted to US$462.2 billion in the third quarter, the highest ever and up US$7.2 billion from the previous quarter.

"There are uncertainties in the international financial market stemming from the U.S.-China trade conflict and the possibility of more U.S interest rate hikes," said an official at the Ministry of Economy and Finance. "We will closely monitor foreign debt trends."

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