S. Korea's foreign debt totals more than $200b

S. Korea's foreign debt totals more than $200b

SEOUL (AFP): Fears of possible debt defaults intensified in South Korea yesterday as the government made the shock admission that the country's total foreign debt was more than US$200 billion -- twice the amount presumed earlier.

The South Korean won touched 2,000 to the U.S. dollar for the first time ever, before closing at 1,962 won per dollar, dealers said.

The 14 percent plunge in value Monday came after Moody's and Standard and Poor's ratings agencies downgraded the country's credit ratings and amid a high demand for dollars for year-end settlements.

"The won kept falling after the country's credit ratings were downgraded again. Banks have no extra dollars to sell. I don't know where the bottom is, " said a dealer at a French bank.

Finance Minister Kang Man-soo told parliament Tuesday that the country's total foreign currency stood at more than $200 billion as of the end of September.

The figure includes $67.8 billion borrowed by overseas branches of South Korean banks and another $40 billion of overseas financing by South Korean business firms, Kang said.

President-elect Kim Dae-jung on Monday told parliament that he was "flabbergasted" after being briefed by Finance Minister Lim Chang-yuel on the depth of the foreign exchange crisis.

"Foreign exchange reserves are at the bottom. It is difficult to stand for a day let alone a month," he said.

According to the central Bank of Korea, $14.6 billion of debt matures between Dec. 16 and Dec. 31.

On the inflow side, Seoul will receive $9 billion from the International Monetary Fund (IMF) and $2 billion each from the World Bank and Asian Development Bank, which will raise its foreign reserves to $19. 4 billion, enough to cover the debt payment.

But disaster looms in January when South Korea has to pay some $10 billion, the largest circulation Chosun daily said.

Seoul's foreign reserves are expected to stand at a mere $6.6 billion even after it receives an additional two billion dollars from the IMF in January, $3.4 billion short of the maturing debt, it said.

The alarming new figures on foreign currency debt intensified concern here that Seoul could default on external debts.

"Time is running out. There must be urgent steps, including an immediate closure of some debt-stricken financial institutions and companies," Chung Yoo-hin of Daewoo Economic Research Institute told AFP.

The insolvent financial institutions, especially merchant banks, and other ailing business firms are gobbling up scarce liquidity, further squeezing the financial market.

Samsung Economic Research Institute's analyst Kwon Soon-woo told AFX-Asia, an AFP financial news affiliate, that some financial institutions would default on foreign loans unless the loans were rolled over.

The crisis deepened after Moody's and Standard and Poor's downgraded the country's credit ratings to junk bond status, they said.

"Local companies' credit standing is at its lowest level, worse than Indonesia and Thailand. They are almost blocked from borrowing overseas," a U.S. bank dealer said.

"Most financial institutions and major companies are in extreme dollar shortage while their overseas debts are not rolled over," he said.