Skorea To Receive $55 Bn In Imf-Led Aid

South Korea would receive at least $55 billion in aid in a package announced by the International Monetary Fund on Wednesday.

IMF Managing Director Michel Camdessus said the IMF would provide $21 billion over three years in standby credits. The World Bank would give up to $10 billion and the Asian Development Bank $4 billion, he said. Other countries including the United States, Britain, Japan, Germany, France, Canada and Australia would pitch in a total of up to $20 billion while Korea remains in compliance with the Fund arrangement, Camdessus said at the end ofday-long talks with South Korean Finance Minister Lim Chang-yuel.

 

Camdessus described the country part of the aid package as supplemental financing in support of Koreas programme with the IMF in the event that unanticipated adverse external circumstances create the need for additional resources.

The IMF chief said at a briefing after Seoul signed a letter of intent with the IMF that the package provides for a decisive and welcome response to the country facing difficulties.

The programme comprises strengthened fiscal and monetary policies, far-reaching financial reforms and further liberalisation of trade and capital flows as well as improvement in the structure and governance of Korean corporations, Camdessus said.

He said he would submit the deal to the IMF board in the next few days, probably next Thursday, with his recommendation for approval.

South Koreas chief negotiator Chung Duk-ku said Seoul had agreed not to release further details about the package until the IMF board had given its approval.

Full implementation of Koreas economic programme will be essential to overcome a difficult period in Koreas economic history, help adapt the Korean economy successfully to the globalised environment, and return the Korean economy to a path of rapid but more sustained growth, Camdessus said.

Finance Minister Lim said: Im really grateful to IMF,World Bank, ADB and other friendly countries for the loanpackage.

Taking this opportunity, we can pave the way to overcome the current financial and foreign exchange crisis, he said in brief remarks after signing the letter of intent.

He was scheduled to give another statement to the Korean people at around 9 p.m. (1200 GMT). Seoul is desperate for assistance because of a tickingtime-bomb in the form of its short-term debt, the reason it called in the IMF.

South Korean media reported this week the central Bank ofKorea was forced to pay $10 billion in short-term foreign debton behalf of Korean banks over the last few days.

About $66 billion of Koreas estimated $120 billion in foreign debt is short-term and about $20 billion was due at the end of this year, analysts said.

On Tuesday, the Finance Ministry threatened to close nine ofthe countrys 32 merchant banks eight of which are listed onthe stock exchange by suspending their business operations.

The merchant banks, which specialise in short-term lending and operate much like finance companies, were given until December 31 to come up with plans to restructure and until March 31, 1998, to show improvement or face closure.

Merchant banks are widely blamed for setting off Koreas financial crisis by haphazard lending practices.

The IMF, however, wants the 12 ailing merchant banks and at least two stricken commercial banks closed immediately rather than see its money directly or indirectly support failed businesses, analysts said.

Finance Ministry officials said Seoul had also agreed to halve its gross domestic product growth rate to three percent next year from a projected six percent this year.

That could swell unemployment to levels unheard of in modern

Korea, an official think tank said earlier this week.

IMF would provide $21 billion over three years in standby credits. The World Bank would give up to $10 billion & the ADB $4 billion.