S. Korea's foreign debts fall in 2016 on soft demand for local bonds

SEOUL, Feb. 22 (Xinhua) -- South Korea's foreign debts declined last year as foreign investors reduced investment into local bonds, a joint announcement by the finance ministry and the central bank showed on Wednesday.

The country's external liabilities totaled 380.9 billion U.S. dollars as of end-2016, down 15.1 billion dollars from a year earlier, the joint statement by the Ministry of Strategy and Finance and the Bank of Korea (BO) showed.

Debts owed to foreigners that mature in less than one year edged up 0.8 billion dollars to 105.2 billion dollars, while debts with a maturity of more than one year declined 160 billion dollars to 275.8 billion dollars.

The slump in foreign debts was attributed to soft demand for domestic bonds, into which foreigners slashed their investment by 17.9 billion dollars last year.

It means the reduced foreign debts did not necessarily lead to improved financial soundness of the South Korean economy.

The country's exports, which account for about half of the economy, slowed down in 2016 amid global economic slump. Consumer spending was lackluster on massive household debts, which increased debt-servicing burden for consumers.

Uncertainty lingered over the economy due to the political unrest, caused by a scandal embroiling President Park Geun-hye that had led to Park's impeachment.

Figures to represent the country's external soundness remained positive last year due to the fall in foreign debts.

The ratio of short-term foreign debts to total external liabilities stayed relatively low at 27.6 percent as of the end of 2016 though it rose 1.3 percentage points compared with a year earlier.

The percentage of short-term debts to foreign currency reserves was unchanged at 28.3 percent.

The net external credit, which means external credit minus foreign liabilities, reached a record high of 403.4 billion dollars as of end-2016, up 78.9 billion dollars from a year ago.

The finance ministry said it will make efforts to maintain the country's external soundness in a stable manner as external uncertainties remain such as the U.S. Federal Reserve's interest rate hikes later this year.