Disagreement emerges in Seoul-IMF talks<\/p>\n
SEOUL, South Korea (AP): Reluctant to accept some harsh
\nconditions, South Korea backpedaled yesterday and said it was
\nstill discussing terms of a multibillion-dollar international
\nbailout of its foundering economy.<\/p>\n
\"We still have some points to be cleared with the IMF
\n(International Monetary Fund),\" said Chung Ui-dong, spokesman for
\nthe Ministry of Finance and Economy.<\/p>\n
Chung was commenting on local news reports that there still
\nwas disagreement between South Korea and the IMF over some key
\nissues, including the country's economic growth rate for next
\nyear.<\/p>\n
Emerging from overnight negotiations with IMF delegates early
\nMonday, Finance and Economy Minister Lim Chang-yuel said the two
\nsides had reached preliminary agreement on terms of the IMF's
\nbailout package.<\/p>\n
Lim said the agreement would become final if he could resolve
\nby telephone with Michel Camdessus, the IMF's managing director,
\n\"a few points that require adjustments.\"<\/p>\n
But Camdessus, in Malaysia for a meeting of Southeast Asian
\nleaders, indicated that the deal reached in Seoul was not good
\nenough.<\/p>\n
\"We have made a giant leap toward an agreement. But we in the
\nIMF have yet to have a legalistic conception of an agreement.
\nUntil the last 'i' is dotted, the agreement is not there. So I
\ncan't say anything more,\" he said.<\/p>\n
South Korea's national news agency Yonhap said the finance
\nminister and the IMF chief disagreed over South Korea's gross
\ndomestic product growth for next year. South Korea wants at least
\n3 percent growth, while the IMF insists on growth of less than
\n2.5 percent, it said.<\/p>\n
Yonhap said the two leaders also failed to agree on how soon
\nSouth Korea's financially shaky merchant banks should be
\nliquidated. The IMF wants an outright closure of those banks,
\nwhile South Korea wants them to be phased out over several
\nmonths, it said.<\/p>\n
One official at the Finance and Economy Ministry indicated the
\ntwo sides would not be able to resolve their differences Monday.<\/p>\n
\"The final agreement could be delayed until Tuesday,\" he said,
\nspeaking on customary condition of anonymity.<\/p>\n
Lim earlier announced a preliminary deal after overnight
\nnegotiations with Hubert Neiss, head of the IMF's Asian-Pacific
\ndivision. Neiss headed the IMF's negotiating team.<\/p>\n
South Korean media, quoting various government sources, said
\nthe bailout fund would be between US$50 billion and $60 billion
\nand that the first installment of about dlrs 10 billion is
\nexpected later this week.<\/p>\n
South Korea turned to the IMF on Nov. 21 for rescue of its
\ntroubled economy, the world's 11th-largest. It said last week
\nthat the amount needed would be \"far more than the dlrs 20
\nbillion\" it originally sought from the IMF.<\/p>\n
IMF loans usually come with strict conditions attached,
\nincluding mandates for reduced government spending, low economic
\ngrowth and clearing up of insolvent banks and companies.<\/p>\n
The IMF-imposed belt-tightening would raise unemployment from
\nthe present 2.5 percent to up to 7 percent in 1998, forcing about
\n1.5 million people out of their jobs, the highest number since
\nthe 1950-53 Korean War, Yonhap said.<\/p>\n
One key issue in the negotiations was an IMF demand for an
\noutright shutdown of 12 debt-ridden merchant banks teetering on
\nthe brink of bankruptcy, it said.<\/p>\n
South Korea also agreed to open its bond market wider to
\nforeign investors, Yonhap said.<\/p>\n
South Korea is the fourth Asian country to turn to the IMF for
\nhelp so far this year. The Philippines, Thailand and Indonesia
\nnow are receiving assistance from the IMF.<\/p>\n
South Korea's financial crisis was brought on by a slew of
\ncorporate failures that put enormous strain on the banking
\nsystem. Bad loans, now estimated at US$26 billion, sent the
\nKorean currency plunging against the U.S. dollar.<\/p>\n
With credit ratings down, Korean banks, unable to borrow
\nabroad, swarmed into the domestic foreign exchange market,
\nfueling a currency crisis.<\/p>\n
Korean banks have difficulty servicing short-term debt. More
\nthan two-thirds of South Korea's $110 billion debt is due in a
\nyear.<\/p>\n
The uncertainty drove the Korean stock market down further
\nMonday, with its key index dropping 14.70 points, or 3.6 percent,
\nto close at 393.16. The nation's currency also sank lower,
\nfinishing the day at 1,187 to the dollar. It closed Friday at
\n1,170.<\/p>",
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