Business loans in South Korea increased by the biggest margin in over a decade in the first quarter, suggesting that many companies have only stayed afloat on debt during the COVID-19 pandemic.

According to the Bank of Korea(BOK) on Tuesday, outstanding loans in the service sector totaled 776 trillion won, a 12-year, record-high rise of 34 trillion won from the previous quarter.

Loans to manufacturing firms also rose by the biggest margin of 14-point-eight trillion won to hit a total of 372 trillion won.

Meanwhile, loans to construction companies marked a turnaround from negative growth in the previous quarter, totaling 44-point-one trillion won.

The sharp increase in corporate debt was largely attributed to sluggish demand at home and abroad due to the pandemic, leading to reduced sales and possibly leaving many businesses facing a liquidity crunch.