Last Year’s External Debt Reached $542.4 Billion... Increased by $75.5 Billion Compared to Previous Year

'2020 Year-End External Debt Trends and Evaluation' on the 19th

[Image source=Yonhap News]

[Asia Economy Reporter Jang Sehee] Last year, external debt reached $542.4 billion, an increase of $75.5 billion compared to the previous year.

The Ministry of Economy and Finance announced this information on the 19th through the '2020 Year-End External Debt Trends and Evaluation.'

Short-term external debt with a maturity of one year or less was $157.5 billion, up $23 billion from the end of last year, while long-term external debt with a maturity exceeding one year was $385 billion, an increase of $52.5 billion compared to the end of last year.

External claims amounted to $1.0207 trillion, increasing by $73.1 billion from the end of last year, and net external claims (external claims minus external debt) decreased by $2.4 billion to $478.2 billion compared to the end of last year.

The Ministry explained, "The increase in external debt last year was mainly due to the expansion of domestic foreign currency fund demand amid the special situation of the COVID-19 pandemic, leading to increased bank borrowings, and the relatively stable Korean won bonds attracting more foreign investment in government and public bonds."

Looking at changes in external debt by sector, the government sector ($28.8 billion) increased due to increased foreign investment inflows in government bonds owing to the relative stability of Korean won bonds and an increase in the dollar-converted amount caused by the depreciation of the exchange rate.

The central bank sector ($0.5 billion) saw a slight increase due to an increase in foreign-held bonds. The banking sector ($27.5 billion) increased due to the expansion of short-term borrowings following increased domestic foreign currency fund demand after COVID-19 and the issuance of long-term foreign currency securities to proactively secure foreign currency liquidity.

The other sectors ($18.7 billion) also increased due to the expansion of long-term foreign currency securities issuance by corporations and an increase in cash and deposit assets.

Regarding external debt soundness, the proportion of short-term external debt to total external debt (29.0%, up 0.2 percentage points) and the ratio of short-term external debt to foreign exchange reserves (35.5%, up 2.6 percentage points) increased compared to the end of last year due to increases in both short-term and long-term external debt. However, these levels remain significantly lower than during past crises at around 30%, indicating that external debt soundness is still considered favorable.

A Ministry of Economy and Finance official stated, "Uncertainties in the international financial market dollar persist due to the emergence of COVID-19 variants and possible delays in vaccination," adding, "The government plans to closely monitor external debt trends and the potential for future gradual increases while strengthening efforts to manage external soundness."

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