By IANS,
Seoul : South Korea’s foreign debts contracted to $394.3 billion in the third quarter as a reduction in short-term external debts outnumbered an increase in long-term debts, the central bank said Tuesday.
Foreign debts reached $394.3 billion as of the end of September, down $4.9 billion dollars from three months earlier, according to the Bank of Korea (BoK).
Long-term external liabilities that mature in one year or more expanded $10.5 billion on-quarter to $255.8 billion in the three months ending Sep 30, but short-term debts shrank by $15.4 billion during the quarter, contributing to a decrease in foreign liabilities of Asia’s No.4 economy.
“Domestic banks repaid short-term foreign debts rather than refinancing them, which reflects the improvement of lenders’ debt-servicing capability,” Cho Yong-seung, head of BoK’s international investment position team, told reporters.
Local banks borrowed dollars on spot to cover short position in the dollar/won non-deliverable forwards (NDF), but the lenders repaid the dollars during the third quarter as offshore investors who built up NDF long positions on speculation for the won’s depreciation against the dollar, liquidated the long positions amid relatively stable financial conditions, according to Cho.
The ratio of short-term foreign debts against foreign reserves came in at 45.7 percent as of the end of September, down 4.9 percentage points from three months earlier, while short-term external debts accounted for 35.1 percent of the total foreign debts as of end-September, indicating the nation’s ability to repay short-term debts was enhanced during the July-September period.