Korea"s Foreign Debt to surpass 50% of GDP

Korea's foreign debts are forecasted to surpass 50% of its GDP (Gross Domestic Product) by year-end.
According to the IMF's (International Monetary Fund) annual report, Korea's total foreign debts are estimated to increase to 163.3 billion dollars (short-term foreign debts 39.6 billion dollars), 51.5% of its yearly GDP by the end of 1998.
But if Korea's domestic economy continues to slump at its current pace, Korea's GDP will decrease more and as a result of that, Korea's foreign debts burden will increase more than 50% of GDP.
According to classifications set by the World Bank, countries with foreign debts more than 50% of its GDP are classified as heavy-debt countries.
Regarding this matter, an official at the Korea Finance Research Institute said on September 18, 'Korea's foreign exchange crisis occurred due to transitory foreign exchange shortages last year. But another foreign exchange crisis is disconcerting because of the lack of repayment capability.'
He also said, 'The Korean government has to hurry and bolster the economy in order to defend itself against another possible foreign exchange crisis.'
To do so, it is now urgent for the Korean government to increase governmental expenditures for the SOC (social overhead capital) investment and unemployment, the official pointed out.
Meanwhile, an official from the Bank of Korea commented that Korea can afford to reimburse its foreign debts, because Korea is forecasted to record an additional trade surplus of 5.5 billion dollars by year-end and foreign exchange inflow will increase due to companies selling their assets to foreign investors and various bail-outs by international finance institutions including the IMF.