Short-term External Debt Rises by $15 Billion in Q2, Weakening Debt Health Indicators

South Korea's short-term external debt increased in the second quarter of this year, leading to a slight deterioration in external debt health indicators.

According to the Ministry of Finance's report on 'Q2 External Assets and Liabilities Trends' released on August 20, the country's external debt reached $812.8 billion at the end of the second quarter, an increase of $38.4 billion from the previous quarter.

By maturity, short-term external debt, due within one year, rose by $15 billion to $198.5 billion. Long-term external debt, with maturities exceeding one year, increased by $23.5 billion to $614.3 billion.

In terms of sectors, external debt for the government and other sectors rose by $8.4 billion and $36.3 billion, respectively. In contrast, the central bank and banks saw their external debt decrease by $1.5 billion and $4.8 billion, respectively.

During the same period, external assets increased by $40.7 billion to $1.1806 trillion. Consequently, net external assets, calculated by subtracting external liabilities from external assets, rose to $367.8 billion, up $2.3 billion from the previous quarter. The increase in external assets slightly outpaced the rise in external liabilities, marking a return to growth in net external assets after three quarters.

However, the increase in short-term external debt has led to a slight decline in external debt health indicators. The proportion of short-term debt in total external debt rose from 23.7% at the end of the first quarter to 24.4% at the end of the second quarter, an increase of 0.7 percentage points.

The ratio of short-term external debt to foreign exchange reserves also increased from 43.3% to 46.5%, a rise of 3.2 percentage points. Although the increase in long-term external debt was larger, the simultaneous rise in short-term debt contributed to this change.

A Ministry of Finance official stated, "Considering the slight increase in net external assets and the rise in foreign exchange reserves, the country's external payment capacity is assessed to be at a healthy level."

The foreign currency liquidity coverage ratio (LCR), which indicates the repayment ability of domestic banks' external debt, stood at 167.0% at the end of the second quarter, significantly exceeding the regulatory requirement of 80%.