South Korea holds a sufficient amount of foreign exchange reserves to cope with any crisis, a senior finance ministry official said Monday, dismissing worries that the nation's financial system is vulnerable to foreign capital flight.
Media reports speculated earlier that the nation's foreign reserves declined below $300 billion recently as the financial authorities rushed to ease the won's tumble with massive dollar-selling intervention. According to the central bank, the nation's foreign reserves stood at $312.19 billion won as of the end of August.
"Our foreign reserves are enough to cope with any crisis," Deputy Finance Minister Choi Jong-ku told reporters. "Its absolute amount increased and other qualitative indexes such as the ratio of foreign reserves to short-term debts also improved significantly."
Even if the amount falls below $300 billion, there is no reason to worry, he added.
His remarks came amid worries that the global economy might slip back into a recession caused by deepening fiscal debt woes in Europe and stagnant recovery in major economie
South Korea's stocks and currency markets have suffered from tumultuous trading recently. The won tumbled to a 13-month low against the U.S. dollar on Monday amid growing appetite among investors for safer assets.
The recent market volatility reminded many of the financial crisis that hit South Korea in 2008 when prolonged market uncertainty caused many to worry that credit could drive up and make it tough to borrow dollars to pay back short-term debts.
Choi admitted that South Korea's financial markets are undergoing steep fluctuations, given its heavy reliance on trade and high market exposure to foreign capital.
But he noted that Korea is not the only country that suffers from increased volatility but it is a global issue that affects many other nations.
Choi added that many local financial institutes had difficulty borrowing dollars last week as market uncertainty froze credit lines.
"It was tough (to borrow dollars) everywhere. It was because uncertainty caused everything to be frozen and created the mood of 'let's wait one or two more weeks,'" he said. "Going forward, things will improve but it would be inevitable to see an increase in borrowing costs."