Capital inflows can take the form of debt (foreigners lending to us) or equity (foreign investors buying property and shares in other productive assets in New Zealand). But each inflow adds to the stock of foreign debt and foreign ownership. The numbers involved are large.
It was designed, of course, to provide depositors with an extra measure of protection from loss, initially quite modest. By deterring liquidity panics, deposit insurance could also shield the aggregate real economy from some of the worst effects of instability in the banking system.