'Increase Exports and Orders'... Export-Import Bank to Raise Debt Guarantee Limits

Reporter Moon Honam munonam@

[Asia Economy Sejong=Reporter Song Seung-seop] On the 9th, the Ministry of Economy and Finance announced that it will issue a legislative notice for the amendment of the "Korea Export-Import Bank Act Enforcement Decree," focusing on improving the Export-Import Bank's external debt guarantee system. External debt guarantees are a system that facilitates smooth export and overseas orders by providing debt guarantees when overseas corporations importing domestic goods borrow purchase funds from domestic or foreign financial institutions.

The amendment introduces an exception clause for external debt guarantees. When Korean companies achieve exports or overseas orders and require local currency financing, they can receive benefits without the Export-Import Bank's loan linkage. Previously, support was only possible if linked to the Export-Import Bank's loans, but going forward, even if the business is conducted in local currency and loans are borrowed from international organizations or commercial banks, the Export-Import Bank will provide guarantees.

Additionally, the annual total limit for the Export-Import Bank's external debt guarantees will be expanded to 50%. According to the Trade Insurance Act, the Export-Import Bank can only provide external debt guarantees up to 35% of the total annual underwriting amount. The Ministry of Economy and Finance explained that with the expansion of the total amount limit, it will actively support the demand for external debt guarantees from export and order companies.

With the system improvement, the scale of the Export-Import Bank's external debt guarantee support is expected to increase by more than 1 billion USD annually on average. The support is expected to be mainly utilized in global infrastructure projects with high local currency financing demand and in sectors such as defense and nuclear power, where funding demand is rapidly increasing. The amendment is scheduled to be publicly announced after the legislative notice on the 20th of next month and promulgated and enforced within the first quarter of this year.