As of the end of the first quarter this year, external debt hit a record high of $774.4 billion. External debt, simply put, refers to the money Korea must repay to foreigners. When unpaid amounts increase in items such as Government Bonds held by foreigners or proceeds from foreign investors' stock sales, the size of external debt also grows. It is seen as a phenomenon arising during profit-taking by foreign investors in the Korean stock market.
According to the "Trends in external assets and debt at the end of the first quarter of 2026" released by the Ministry of Finance and Economy on the 27th, external debt was tallied at $774.4 billion, up $4.2 billion from the previous quarter.
Of that, short-term external debt (maturity within one year) rose by $4.2 billion to $183.6 billion, while long-term external debt (more than one year) held at the previous quarter's level. By institutional sector, external debt in the other sector (nonbank, etc.) increased by $14.2 billion, while the rest—government, Central Bank, and banks—declined.
The Finance Ministry said, "In the process of profit-taking by foreigners in the stock market, proceeds from domestic stock sales (unpaid won-denominated deposits) led to an increase in short-term debt in the other institutional sector, such as securities firms."
However, the effect of foreign capital inflows from inclusion in the World Government Bond Index (WGBI), among other factors, does not appear to have been particularly strong in the first quarter. Typically, foreigners' investment in Korean Government Bonds is recorded as government external debt, and government external debt in the first quarter fell by $2.4 billion from the previous quarter. A Finance Ministry official said, "Because it was before formal inclusion in the WGBI in April, the effect of related capital inflows was limited, and the decline in bond prices due to rising interest rates and adjustments in foreigners' won-denominated bond investments appear to have had an impact."
Meanwhile, external assets—"the money we are to receive from abroad"—stood at $1.1399 trillion, down $3.3 billion from the previous quarter. Net external assets, calculated by subtracting external debt from external assets, were $365.5 billion, down $7.6 billion.
Soundness indicators worsened slightly. The short-term external debt-to-total external debt ratio rose from 23.3% to 23.7%, and the short-term external debt-to-foreign reserves ratio rose from 41.9% to 43.3%. However, the Finance Ministry said, "The increase in short-term external debt stemmed from higher confirmed standby/transitory obligations from stock sales rather than borrowing, and the scale of net short-term external assets remains high, so external payment capacity is sound."
The foreign currency liquidity coverage ratio (LCR), which indicates domestic banks' capacity to repay external debt, is 165.6%, exceeding the regulatory ratio of 80%.