Foreign Liabilities
The Bank of Korea released the International Investment Position (IIP) report for March on May 21 and announced that the foreign liabilities balance increased by US$9.2 billion to US$425.4 billion between December last year and March 2014.
The short-term liabilities maturing within one year increased by US$8.5 billion to US$123.8 billion due to the increase in foreign currency borrowing by banks. The ratio of the short-term debts to total liabilities went up from 27.7 percent to 29.1 percent during the same period as well to hit a new high since June last year, when the percentage was 30.0 percent. The ratio of short-term liabilities to the foreign exchange reserve as of the end of March was 34.9 percent, 1.7 percentage points higher when compared to the end of December 2013.
The ratios rose for the first time in seven quarters. Long-term liabilities increased by US$700 million to US$31.6 billion.
In the meantime, foreign credit totaled US$616.5 billion, showing 2.4 percent growth mainly in central bank reserve assets and securities investments. The net external credit, calculated by subtracting external liabilities from foreign credit, increased by US$5.4 billion to US$191.1 billion.
“The increase in the ratios is likely to be temporary, caused by the base effect, but it is also necessary to monitor whether it will continue for a while or not,” said the Ministry of Strategy and Finance, adding, “Most of the indices showing foreign payment capabilities and external soundness are still solid though.”
The overseas investment balance rose US$22.4 billion to US$986.6 billion, US$10.2 billion of which was securities investment. The foreign investment balance, on the contrary, fell by US$5.8 billion to US$990.9 billion as the direct investment and securities investment declined by US$3.7 billion and US$7 billion each, to more than offset the increase in bank loans.