Short-term foreign debt on the rise

Alarm bells are ringing again in the nation¡¯s foreign exchange market. Amid steadily rising total foreign debt, the portion of short-term debt has skyrocketed to its highest level since March 1998.

The Ministry of Finance and Economy reported on August 4 that short-term foreign debt at the end of June hit US$47.5 billion, a gain of US$7.7 billion from the previous month. Total external liabilities also amounted to US$142 billion, up US$0.5 billion from a year earlier.

The finance ministry attributed the surge in short-term foreign debt to increased borrowings of foreign bank branches and expanded credit for external transactions by local trading firms.

The short-term foreign debt, which the country must pay within one year, is a primary indicator of the stability of foreign currency management, and the ever-increasing short-term debt portion is taking a heavy toll on the Korean economy.

The portion of short-term foreign debt in June stood at 33.4% of total external liabilities. The figure increased to the early 1998 level, when the foreign currency crisis had started to calm down with the help of the International Monetary Fund¡¯s bailout.

Notably, the short-term debt portion of total external liabilities has recently seen a sharp gain, climbing upwards for six months in a row.