South Korea plans to open a foreign currency account for the country's low-interest loan projects for developing nations, the finance ministry said Tuesday, eliminating the need for unnecessary foreign exchange conversion procedures.

The revision, passed by the Cabinet, will allow the government to deposit the Economic Development Cooperation Fund in foreign currencies directly into private banks, according to the Ministry of Economy and Finance.

The move came as the current fund for the program is deposited at the Bank of Korea in the won, leading to unnecessary foreign exchange conversion costs when implementing projects.

"Through this revision, South Korea can directly utilize funds collected from developing nations for new loans, eliminating the need for currency exchanges," the finance ministry said.

Seoul launched the EDCF program in 1987 to help developing countries with their basic infrastructure.

South Korea plans to select the bank to deposit the fund in the second half of 2023. (Yonhap)