South Korea’s National Assembly passed a bill to increase the Export-Import Bank of Korea (Korea Eximbank)’s statutory capital limit to 25 trillion won ($18.75 billion) from the current 15 trillion on Wednesday.

The National Assembly’s Strategy and Finance Committee held a subcommittee meeting on the same day and passed a bill to partially amend the Korea Eximbank Act that includes the expansion of its capital limit. If the bill is processed as planned at a committee meeting on Friday, it is expected to be passed in the plenary session that will take place during the following week.

Exporting countries usually provide policy financing and guarantees for defense or infrastructure procurement projects overseas due to their significant size. The issue lies in the current Korea Eximbank Act, which ties the credit limit for loans to individuals or corporations to 40 percent of their equity capital.

The bank’s equity capital was 18.4 trillion won in 2023, and the policy financing limit that can be granted to individual companies was 7.4 trillion won.

Korean defense companies recently secured a 30 trillion won export contract in Poland, but the bank’s policy financing limit to support the orders was exhausted, putting the orders at risk of falling through. With the latest bipartisan agreement, however, major companies in defense and other large-scale procurement sectors can now expect that their large-scale orders will have the government’s policy financing support.

“There was no capital increase proposal for Korea Eximbank in the 2024 budget, so we have no choice but to contribute in kind (equity) this year,” Representative Yoo Dong-soo said. “We will make efforts to allow the government to inject as much cash as possible moving forward.”

The Ministry of Economy and Finance is also considering a follow-up measure to inject 10 trillion won in kind and 5 trillion won in cash into Korea Eximbank by 2030 to ensure the rapid replenishment of the bank’s capital.

By Chun Gyung-woon, Kim Jung-hwan, and Yoon Yeon-hae

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