SEOUL: The ratio of South Korea’s short-term foreign debt to its foreign reserves fell to the lowest level in a decade in the first quarter, bolstering the country’s buffer against possible capital outflow, central bank data showed Monday. The country’s short-term external debt totaled US$112.8 billion as of the end of March, down $2.5 billion from the end of last year, according to the data compiled by the Bank of Korea.
Korea’s total external debt reached $418.9 billion as of end-March, also down $6.5 billion over the cited period. The ratio of the short-term debt against the country’s total external debt also slipped 0.2 percentage point to 26.9 percent. In tandem with the fall in short-term debt, the portion of the amount to the country’s foreign reserves fell 0.6 percentage point to 31.1 percent, the lowest since 26.9 percent in the third quarter of 2004.
South Korea’s short-term foreign debt, which refers to external debt with a maturity of less than one year, was an area of concern during past financial crises as surges in foreign debt left local banks vulnerable to external shocks. The ratio had sharply surged during the global financial crisis, surging to 79.3 percent in the third quarter of 2008.
The data, meanwhile, showed that the country’s net international investment position (NIIP) — the value of external assets minus external liabilities — slipped $1.4 billion from the end of last year to $80.5 billion. The on-quarter decline came as a rise in external assets, stemming from stock price gains, offset the increase in external liabilities, according to the central bank.
