The central bank said it was largely due to reduced trade-related credit by exporters and a fall in overseas borrowing by banks. Of the external debt balance of US$411.8 billion as of the end of the second quarter, short-term portion accounted for $119.6 billion, down $2.6 billion from the previous quarter.
Short-term external debt is the weakest link of Korea's financial system and the government is keen to keep it at a manageable level. The growth of such debt was one of the main reasons behind the rapid exit of foreign capital that Korea faced in several occasions when the 2008 global financial crisis began. At the end of the third quarter in 2008, the share of short-term foreign debt was in excess of 50 percent.
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