3Q External Debt $522 Billion... Up $7.8 Billion from Previous Quarter

[Asia Economy Reporter Kwangho Lee] The Ministry of Economy and Finance announced on the 19th in the '2020 Q3 External Debt Trends and Evaluation' report that the external debt in the third quarter reached 511 billion USD, an increase of 7.9 billion USD compared to the previous quarter.

Short-term external debt (maturity within 1 year) was 144.1 billion USD, a decrease of 10.2 billion USD from the previous quarter, while long-term external debt (maturity over 1 year) was 366.9 billion USD, an increase of 18.1 billion USD from the previous quarter.

External claims amounted to 972.4 billion USD, increasing by 19.5 billion USD from the previous quarter, resulting in net external claims (external claims minus external debt) of 461.4 billion USD, up 11.6 billion USD from the previous quarter.

An official from the Ministry of Economy and Finance stated, "This increase in external debt was mainly due to increased foreign investment in domestic government and public bonds, reflecting the relative stability of won-denominated bonds, and the issuance of long-term foreign currency securities driven by improved borrowing market conditions in Q3."

Looking at changes in external debt by sector, the government sector (7.8 billion USD) increased mainly in long-term external debt due to increased foreign investment in domestic bonds, while the central bank sector (-12.5 billion USD) significantly decreased mainly in short-term external debt due to repayment of funds from the Korea-US currency swap.

In the banking sector (6.6 billion USD), short-term external debt increased by 3.1 billion USD despite a decrease of 2.5 billion USD in domestic bank short-term borrowings due to sufficient dollar liquidity, because of an increase of 4.1 billion USD in borrowings by foreign bank branches for repayment of Korea-US currency swap funds. Long-term external debt increased by 3.5 billion USD due to issuance of long-term foreign currency securities (2.7 billion USD).

The other sectors (6.0 billion USD) mainly saw an increase due to expanded issuance of long-term foreign currency securities by corporations amid improved borrowing market conditions in Q3.

Regarding external debt soundness, short-term external debt sharply decreased, leading to a decline in the ratio of short-term external debt to total external debt (28.2%, down 2.5 percentage points) and the ratio of short-term external debt to foreign exchange reserves (34.3%, down 3.3 percentage points) compared to the previous quarter. While external debt soundness indicators are recovering to pre-COVID-19 levels, they remain significantly lower than during past crises, indicating that external debt soundness is still favorable.

Meanwhile, South Korea's net external claims also increased compared to the previous quarter, maintaining a high level in the 400 billion USD range.

An official from the Ministry of Economy and Finance said, "As uncertainties in international financial markets continue due to the resurgence of COVID-19 infections in major countries and concerns over a no-deal Brexit, the government will closely monitor external debt trends and strengthen efforts to manage external soundness."

This content was produced with the assistance of AI translation services.