With external uncertainties growing, the proportion of short-term foreign debt in Korea’s foreign liabilities has reached its highest level in six years. However, the debt level is not high in consideration of its small absolute amount and Korea’s large foreign exchange reserves.
According to Korea’s international investment position in 2018 released by the Bank of Korea on Feb. 27, Korea’s balance of external financial assets stood at US$1,520.5 billion at the end of 2018, up by US$58.9 billion from a year ago. The balance of foreigners' investment in Korea (financial liabilities) was US$1,107.5 billion, down by US$92.4 billion. Korea’s external assets increased, while debt decreased, with the nation’s net foreign financial assets growing to US$413 billion, up US$151.3 billion in one year.
"Samsung Electronics’ acquisition of Harman and SK Hynix’ acquisition of a stake in Toshiba boosted Korea’s foreign financial assets," a BOK official said. “Foreign financial liabilities include domestic stocks owned by foreigners. A drop in domestic stock prices and the value of the Korean won led to a cut in financial debt last year."
Korea’s foreign credits, excluding stocks, grew by US$30.7 billion to US$908.1 billion, while foreign debt rose by US$28.6 billion to US$440.6 billion. Net foreign credit, a difference between money to receive from foreign countries (foreign credit) and money to pay back to foreign countries (foreign liabilities) amounted to US$467.5 billion, an all-time high. Short-term foreign debt with a maturity of less than one year jumped by US$9 billion to US$577.6 billion from the end of last year.
The ratio of short-term foreign debt, which refers to the short-term foreign debt divided by reserve assets, stood at 31.4 percent, the highest since 32 percent in 2014. The proportion of short-term foreign debt in total foreign liabilities stayed at 28.7 percent, the highest since 31.3 percent in 2012. "Countries with key currencies have higher short-term foreign debt ratios than Korea because their reserve assets are small," a BOK official said. "China and Turkey, which are not countries with key currencies, have short-term foreign debt ratios of 31.9 percent and 110 percent, higher than that of Korea.”
"Korea’s percentage and ratio of short-term foreign debt all rose but still stands around 30 percent, a stable level,” said an official at the Ministry of Strategy and Finance.