Short-term foreign debt rises to 10-year high in Q2

Sept. 5, 2022
onhap

By Yi Whan-woo

The ratio of Korea's short-term foreign debt that matures in a year compared with its foreign exchange reserves surged to its highest level in 10 years at 41.9 percent in the second quarter, according to the Bank of Korea (BOK), Monday.

It is the first time that the short-term foreign debt, which increased $8.9 billion quarter-on-quarter to $183.8 billion, surpassed 40 percent of the reserves since the third quarter of 2012. The ratio once surged to above 70 percent during the 2008 global financial crisis, but continued sliding, to stay below 40 percent for nearly a decade since the fourth quarter of 2012.

While the central bank explained that the surging short-term ratio is due to increases in overseas stock and bond investment, it is triggering concerns as the value of Korean won is plunging while the trade deficit is snowballing. As the won's value plunges, Korea should pay more when making debt payments in dollars.

Accordingly, Korea's total debt came to $662 billion as of end-June, up $7.9 billion from three months earlier.

The country's foreign exchange reserve, meanwhile, decreased $2.2 billion from July to $436.4 billion in August.

Foreign securities, such as Treasury, were valued at $394.9 billion as of last month, up $3.1 billion from the previous month. It accounted for 90.5 percent of total foreign reserves.

The value of deposits decreased by $5.3 billion on-month in August to $17.9 billion, which made up 4.1 percent of the reserves.

Selected articles from The Korea Times