09/03/09 12:30:24 ZCPVKO+I
South Korea's debt
SIR - Your article about "emerging-market contagion" ranked countries
according to their vulnerability to the global credit-crunch (Economics
focus, February 28th). But you did not reflect the actual situation of the
Korean economy. The article portrayed South Korea as the joint third-riskiest
among the countries surveyed, citing "large short-term foreign debts and highly
leveraged banks". This is simply not the case.
Let me provide you with accurate figures. South Korea's short-term external debt
is 75% of its foreign-exchange reserves and it continues to decline. The South
Korean banks' average loan-to-deposit ratio stood at 118% as of the end of 2008
and has been on the decrease since last June.
Thus, the overall risk assessment for the Korean economy, as described in your
article, relies upon incorrect information and estimates.
Cheol-kyu Park
Spokesperson
Korean Ministry of Strategy and Finance
Seoul
Editor's note:
Our figure for short-term debt as a percentage of foreign-exchange reserves
included all debt due within the next 12 months, the definition favoured by the
IMF. At the end of December this was 96%. The figure of 75% includes only
liabilities with an original maturity of up to one year; it excludes maturing
long-term debt. Our loan-to-deposit ratio covered all commercial and specialised
banks and excluded certificates of deposits, the same definition used for all the
countries we surveyed. The Bank of Korea's latest figures show this to be 136%
at the end of December.