Financing uncertainty clouds South Korean ECA push for massive arms deals

(Reuters, London, 8 February 2024) Legislation aimed at increasing South Korea's import-export lending to support huge new defence sales has stalled amid partisan deadlock ahead of a divisive parliamentary election, officials and analysts said. South Korea's ruling and opposition parties have both introduced bills to boost the state bank's equity capital to 25 trillion-35 trillion won ($19 billion-$26 billion), raising the lending limit to 10 trillion-14 trillion won, as the country seeks to expedite Poland's $22 billion weapons purchase. The sale is a key part of South Korea's plan to become the world's fourth-largest defence exporter by 2027. But under current law, the Export-Import Bank of Korea cannot lend more than 40% of its roughly 15 trillion won of equity capital, or about 6 trillion won, to a single borrower. The state bank already provided about 6 trillion won in credit during the first phase of the deal with Poland, South Korea's biggest-ever weapons sale. If there is no credit line to finance procurement from South Korea it could put the unsigned procurement of 308 K9 howitzers and 820 K2 Black Panther tanks in jeopardy,