The South Korean government will extend by six months its guarantee on local banks' foreign debts to enhance their liquidity conditions, the nation's finance ministry said on Tuesday.

According to the Ministry of Strategy and Finance, the government approved a bill during a Cabinet meeting earlier in the day to extend its guarantee for banks on their foreign loans by six months to the end of this year.

Last October, the ministry initially promised local banks to provide state guarantees, worth up to US$100 billion, for their overseas borrowings until June 30 this year so as to help dollar-strapped lenders.

The government plans to submit a bill to the National Assembly for parliamentary approval, the ministry said.

The government gave up the option of extending the guarantee by one year, which it previously put much weight on, fearing it might give an impression that the country is suffering a worse economic condition than other nations, most of which provide the guarantees until the end of this year, the ministry added.

The ministry said that it will also extend the duration of state guarantees from the current three years to five in a bid to enhance longer-term borrowing in overseas markets.

The move comes as local banks are going through a hard time borrowing dollars from overseas amid the global liquidity freeze.

South Korean government officials hope that the current extension will relieve burdens on local banks to borrow foreign debts, according to the ministry.