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Views Article – Sharenet Wealth

Asia, Forex

S.Korea Q2 short-term external debt to reserves ratio hits near 5-yr high

SEOUL, Aug 21 (Reuters) – South Korea’s ratio of short-term external debt to foreign exchange reserves rose to a near five-year high in June on a rush of foreign buying in local public bonds, central bank data showed on Wednesday.

Short-term external debt rose to $140.0 billion by the end of June from $129.4 billion three months earlier while foreign reserves fell to $403.1 billion from $405.3 billion over the same period, the Bank of Korea data showed.

That pushed the ratio of short-term external debt to reserves to 34.7%, up from 31.9% at the end of March and the highest since hitting 34.9% at the end of September 2014.

A rise in the short-term external debt burden indicates the country’s cross-border financial stability is weakening, although the ratio is still far below the 80% recorded in late 2008.

The central bank played down the jump in the debt ratio, with a Bank of Korea official saying the ratio rose mainly due to increased buying by foreign investors of local government and central bank bonds seeking safe assets.

Meanwhile, total external debt owed by Asia’s fourth-largest economy also rose to $462.1 billion as of the end of June from $440.6 billion three months before. (Reporting by Joori Roh and Yena Park; Editing by Choonsik Yoo and Sam Holmes)


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