Guarantees for 1st Batch of Korea’s Arms Exports to Poland limit 2nd batch due to 40% limit on equity capital

(Business Korea, Seoul, 4 July 2023) According to the Export-Import Bank of Korea’s loan and guarantee data by item and country on July 3, the state-run bank provided 488.2 billion won (US$375.7 million) in financial support in the form of loans and guarantees to the defense sector in the first five months of this year. The total amount of loans and guarantees provided by Korea Eximbank to all industries in the same period was 31.8 trillion won. Export finance for Korea’s defense exports accounted for 1.6 percent of the total export finance provided by Korea Eximbank this year. According to the Enforcement Decree of the Export-Import Bank of Korea Act, the state-run lender cannot provide credit to the same borrower for more than 40 percent of its equity capital. Korea Eximbank will thus be unable to afford to give additional loans and guarantees to Poland if it provides US$5 billion in support for the first batch. The amount of loans and guarantees provided by Korea Eximbank in connection with purchases of weapons signed from 2018 to 2021 ranged from 100 to 500 billion won per year. But the figure surged to the two trillion won range in 2022. Guarantees with Poland accounted for most of the financial support, in the US$2 trillion range. In addition to Poland, Korea Eximbank provided defense-related financial support to the United Arab Emirates (UAE), Egypt, and Indonesia in 2022.