Powerful Economy to Push South Korea Out of Debt

South Korea, once one of the world’s biggest borrowers, is expected to turn the tables next year and become a net creditor nation.

The country was the world’s fourth largest debtor in mid-1986 with a debt of $47.4 billion. Its outstanding foreign debt should drop well below $30 billion in 1989, by which time its foreign assets should be worth nearly $32 billion, officials of the Economic Planning Board said.

Even at the start of this year, economists predicted that the country would not reach net creditor status until 1991. “It’s clearly an important psychological step,” one foreign banker said. “It shows what a powerhouse this economy is.”

South Korea’s overseas assets include $12.7 billion of foreign exchange reserves as of the end of October, deposits in overseas banks, investment in foreign stocks and bonds and exports sold on credit.

This year South Korea will repay an estimated $3.8 billion in repayments ahead of schedule, a board official said.

Since 1986 South Korea has chalked up huge trade surpluses coupled with double-digit economic growth. The board estimates that this year’s current account surplus will hit $13.8 billion, almost as much as in 1986 and 1987 combined.