Foreign reserves rocket
Korea’s foreign currency reserves grew by a record amount last year, though they dropped slightly last month from November’s record high, the Bank of Korea said yesterday.
The nation’s foreign currency reserves rose by $68.77 billion last year to hit $269.99 billion. That, the bank said, represents the biggest spike since at least the 1960s, the earliest data on record. The bank attributed part of the spike in 2009 to the nation’s sizable current account surplus.
In November, reserves hurdled to a record high of $270.89 billion but then edged down $900 million last month, marking the first decrease in 11 months. The bank pegged the slide on the strengthening of the U.S. dollar, which eroded the value of yen- and euro-denominated currencies.
“In 2008, foreign currency reserves fell sharply as the BOK provided liquidity to cash-strapped banks, but last year they could pay it back thanks to the economic recovery,” said Kim Kwan-hee, an official with the BOK.
Last month, the government retrieved about $200 million in maturing dollar funds that it provided to local banks. The National Pension Service also paid back $1.3 billion to the BOK as part of its currency swap arrangement with the central bank.
“The current account surplus indirectly helped, as banks used the influx of dollars to pay back their dollar-denominated debt,” Kim said.
Last week’s BOK data showed that Korea’s current account surplus hit over $41 billion between January and November, well on track to post a record-high annual surplus.
As of November, Korea had the world’s sixth-highest level of foreign reserves. Some economists, however, doubt the conventional wisdom that the more foreign reserves a country has, the better it is for the economy, saying there are downsides as well.
By Moon Gwang-lip [firstname.lastname@example.org]