The government is preparing to expand the scale of trade finance supply this year to '377 trillion won + α.' Amid heightened uncertainty in the trade environment due to the new U.S. government's tariff policies, President Lee Jae-myung has directed to 'actively expand national support for exporting companies.'
According to the government on the 11th, the Ministry of Trade, Industry and Energy reported the trade finance supply target for this year as 377 trillion won during the first Cabinet meeting chaired by President Lee after his inauguration on the 5th of last month.
Initially, the government had stated at the export strategy meeting last February that it would supply 366 trillion won in trade finance through the '2025 inter-ministerial emergency export plan.'
However, after the first supplementary budget was prepared in May, the supply target was adjusted upward by 11 trillion won. This is because additional grants were provided through the supplementary budget, including ▲ 300 billion won for trade insurance funds ▲ 70 billion won for the Korea Technology Finance Corporation (KOTEC) ▲ 100 billion won for the Korea Credit Guarantee Fund (KODIT) ▲ 200 billion won for the Export-Import Bank ▲ 100 billion won for the Industrial Bank, resulting in a greater capacity for trade finance supply through insurance, guarantees, and loans.
Including this, the government planned to execute trade finance on a scale of ▲ 262 trillion won by the Korea Trade Insurance Corporation (K-sure) ▲ 85.5 trillion won by the Export-Import Bank ▲ 15.3 trillion won by the Korea Credit Guarantee Fund (KODIT) ▲ 5.9 trillion won by the Industrial Bank ▲ 5 trillion won by the Korea Technology Finance Corporation (KOTEC) ▲ 1.7 trillion won by IBK Industrial Bank ▲ 1.3 trillion won by the Korea SMEs and Startups Agency (KOSME) ▲ 600 billion won by the Korea Agro-Fisheries & Food Trade Corporation.
President Lee confirmed shortly after receiving a report from the Ministry of Industry that he had directed to more actively expand the supply of public sector trade finance. Accordingly, the government is preparing a trade finance supply plan of '377 trillion won + α.' A Ministry of Industry official noted, 'This plan is expected to be included in the new government's economic policy direction and the export measures for the second half of the year.'
The government believes that major policy financial institutions have sufficient liquidity supply capacity without the need for additional supplementary budgets.
First, the Korea Trade Insurance Corporation (K-sure), which accounts for the largest share of total trade finance supply, has a limit of 280 trillion won for export insurance contracts this year. This limit refers to the maximum limit of trade insurance set by the National Assembly. Compared to the current supply plan (262 trillion won), this is 18 trillion won higher.
The Export-Import Bank also has additional supply capacity. As of the end of the first quarter of this year, the Bank for International Settlements (BIS) capital adequacy ratio for the Export-Import Bank is 15.31%, which is at a good level. The BIS capital amounts to about 24 trillion won, and the risk-weighted assets are about 157 trillion won. Even if the scale of policy finance supply included in risk-weighted assets increases by about 14.8 trillion won, the government can maintain the capital ratio target (14%) set at the time of preparing the 2025 budget.
The Korea Credit Guarantee Fund (KODIT) and the Korea Technology Finance Corporation (KOTEC) also have room. The guarantee supply targets for this year for the two institutions, including trade finance, are 61.3 trillion won and 28.9 trillion won, respectively, and they can self-increase within the legal limit of 5% for economic response purposes.
A government official said, 'Discussions are still ongoing regarding which institution will increase how much,' adding, 'We will also collaborate with the Ministry of Economy and Finance to prepare the plans.'