Five South Korean Banks Considering $22B Loan to Finance Arms Sales to Poland

Five South Korean banks have come to the aid of Poland in their quest to acquire $22 billion worth of weapons, marking Seoul's most extensive arms deal, covering the procurement of rocket artillery systems and fighter jets.

In a bid to facilitate this significant arms transaction, South Korea is harnessing the support of local banks, as the statutory limits on import-export lending have been reached.

"Five local banks are reviewing a syndicated loan as a support measure" to help Poland finance its purchase of South Korean weapons, a South Korean government official told Reuters. While specific details of the syndicated loan have not been divulged, such loans typically involve a group of lenders providing funding for a single borrower to support substantial deals.

This development serves as the first indication of South Korea's efforts to overcome the financing challenges that could hinder the arms deal between the two countries. The comprehensive arms agreement, signed last year, saw South Korean firms like Korea Aerospace Industries (KAI), Hyundai Rotem Co. and Hanwha Defense Systems Corp agreeing to supply hundreds of Chunmoo rocket launchers, K2 tanks, K9 self-propelled howitzers, and FA-50 fighter aircraft to Poland. This initial agreement was valued at $13.7 billion, making it South Korea's largest arms deal up to that point.

A representative from a Korean defense company confirmed the syndicated loan plan, suggesting that additional financing measures could be explored if necessary.

This move is in response to the remarkable growth in South Korea's defense exports, which escalated from $7.25 billion to approximately $17 billion in 2022. The surge in exports was partially attributed to the opportunities presented by the ongoing conflict in Ukraine, which increased the demand for South Korean weaponry.