South Korea’s state export bank had to issue bonds in Europe, the US and Singapore to raise funds for loans to Poland for Korean weaponry. The bank’s CEO admitted in an interview with Polish journalists that it will likely not be able to offer credit on terms matching the EU’s SAFE mechanism for future purchases.
Since 2022, Poland has been buying large quantities of South Korean military equipment – K2 tanks, K9 howitzers, FA-50 jets and K239 Chunmoo launchers. These purchases were financed by loans from the state-owned Korea Eximbank, guaranteed by K-SURE (Korea Trade Insurance Corporation). The interest rate is the same for all contracts, regardless of the type of equipment, and is based primarily on Poland’s credit rating. Repayment has not yet started.
Korea Eximbank obtained the funds by issuing bonds on international markets. The bank’s rating from S&P is AA – the same as the South Korean government. For comparison, the EU is rated AA+, Poland A-/A-2 in foreign currency.
Borrowing to lend
– We are one of the largest institutions issuing dollar-denominated bonds – said Jang Woong-Sik, general director of the department at Korea Eximbank, when asked by Polish media. He added that the bank issues $20-30 billion in bonds annually. The cost of these bonds, plus a small margin, forms the basis of the interest rate on loans to Poland, as explained by Sigweon Park, executive director at K-SURE.
Both executives stressed that comparing these loans to the EU’s SAFE mechanism or the US Foreign Military Financing (FMF) program is incorrect. – We would like to clearly point out that we will probably not be able to provide credit on the same terms as European or American institutions. This is because the Korean government does not have the same creditworthiness as EU institutions or eurozone countries – said Jang Woong-Sik.
Future terms and conditions
When asked about possible interest rates for future loans – Poland is considering buying more K2 tanks – Jang Woong-Sik listed two key factors: the creditworthiness of Korean financial institutions (since Korea Eximbank must raise funds on the market) and Poland’s rating. He also noted that loans are not disbursed until the actual delivery of weapons, so interest does not accrue before that. This is significant given delays in the FA-50 PL variant – deliveries are now set for mid-2027 to 2029.
The loan period is „within 20 years” according to Sigweon Park. The representatives of Korean institutions emphasised that both SAFE and FMF are more like subsidies than standard loans, but also pointed out that more favourable financing does not always mean better equipment. Under SAFE, at least 65% of components must be European; under FMF, only US equipment. Similarly, Korea Eximbank finances only equipment made in South Korea or using Korean technology.
Poland is the world’s largest importer of South Korean weapons. The scale of contracts signed since 2022 initially caused legal and risk management difficulties, but now the bank is diversifying into projects in the Middle East, South Asia and Latin America. – The Korean government treats the defence sector as a key industry to support – said Sigweon Park. – We will do our best to ensure the continued export of Korean military equipment – declared Jang Woong-Sik.
Źródło: WNP.PL, Fot. Materiały prasowe / ZOOM MON / st. szer. spec. Denis Rubelt/21 bsap.
