Korea’s overseas debts near $400 bil.

By Kim Tae-gyu

The country’s foreign liabilities have approached $400 billion, which many analysts point out is a psychologically significant level, according to the data released by the Bank of Korea (BOK).

The central bank said Tuesday that Korea’s overseas debt amounted to $398 billion as of the end of June, which marks an increase of $15.4 billion from the previous quarter.

“The amount of short-term debt was almost flat but that of long-term debt, of which maturity is longer than a year, jumped by more than $14 billion,” a BOK official said.

“As a result, the proportion of short-term debt of the overall foreign loans fell by 1.2 percentage point to 37.6 percent on a quarter-on-quarter basis. That means that global investors positively regard the fundamentals of Korea Inc.”

The BOK official added that more good news is that the $15.4 billion rise is less than the first quarter when the uptick was $22.6 billion.

“Our receivables outside of the nation stood at $48.74 billion as of June, which is higher than debt by $8.95 billion, up $1.86 billion from three months before. Accordingly, we are a net creditor, not a debtor,” he said.

“I understand that the soaring debt causes some worries but credits rose at a much faster pace. Compared to other emerging economies, we think that our portfolio is much better.”

Unlike the euphoria at the BOK, some observers contend that Asia’s fourth-largest economy cannot indulge in the luxury of being complacent.

“We have some pieces of bad news on hand. As fears on a double-dip recession grow, our exports are feared to experience downturns to lead to a weaker influx of dollars,” professor Lee Phil-sang at Korea University said.

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“In addition, the global financial markets show unrest, which prompts many overseas investors to take their money out of the country. Under the worst-case scenario, those factors may work together to cause a debt crisis here.”

Lee said that the country had better sell off some bonds denominated in dollars to redeem a substantial part of the debts.

“In case the government disposes of their bonds immediately, they may have to brace for some losses. Nevertheless, it is required to put forth such efforts to deal with any future crisis,” Lee said.

“I don’t think that the crisis is imminent but it is possible in the not-so-distant future. We need to prepare for possible rainy days.”