Disagreement emerges in Seoul-IMF talks

Disagreement emerges in Seoul-IMF talks

SEOUL, South Korea (AP): Reluctant to accept some harsh
conditions, South Korea backpedaled yesterday and said it was
still discussing terms of a multibillion-dollar international
bailout of its foundering economy.

"We still have some points to be cleared with the IMF
(International Monetary Fund)," said Chung Ui-dong, spokesman for
the Ministry of Finance and Economy.

Chung was commenting on local news reports that there still
was disagreement between South Korea and the IMF over some key
issues, including the country's economic growth rate for next
year.

Emerging from overnight negotiations with IMF delegates early
Monday, Finance and Economy Minister Lim Chang-yuel said the two
sides had reached preliminary agreement on terms of the IMF's
bailout package.

Lim said the agreement would become final if he could resolve
by telephone with Michel Camdessus, the IMF's managing director,
"a few points that require adjustments."

But Camdessus, in Malaysia for a meeting of Southeast Asian
leaders, indicated that the deal reached in Seoul was not good
enough.

"We have made a giant leap toward an agreement. But we in the
IMF have yet to have a legalistic conception of an agreement.
Until the last 'i' is dotted, the agreement is not there. So I
can't say anything more," he said.

South Korea's national news agency Yonhap said the finance
minister and the IMF chief disagreed over South Korea's gross
domestic product growth for next year. South Korea wants at least
3 percent growth, while the IMF insists on growth of less than
2.5 percent, it said.

Yonhap said the two leaders also failed to agree on how soon
South Korea's financially shaky merchant banks should be
liquidated. The IMF wants an outright closure of those banks,
while South Korea wants them to be phased out over several
months, it said.

One official at the Finance and Economy Ministry indicated the
two sides would not be able to resolve their differences Monday.

"The final agreement could be delayed until Tuesday," he said,
speaking on customary condition of anonymity.

Lim earlier announced a preliminary deal after overnight
negotiations with Hubert Neiss, head of the IMF's Asian-Pacific
division. Neiss headed the IMF's negotiating team.

South Korean media, quoting various government sources, said
the bailout fund would be between US$50 billion and $60 billion
and that the first installment of about dlrs 10 billion is
expected later this week.

South Korea turned to the IMF on Nov. 21 for rescue of its
troubled economy, the world's 11th-largest. It said last week
that the amount needed would be "far more than the dlrs 20
billion" it originally sought from the IMF.

IMF loans usually come with strict conditions attached,
including mandates for reduced government spending, low economic
growth and clearing up of insolvent banks and companies.

The IMF-imposed belt-tightening would raise unemployment from
the present 2.5 percent to up to 7 percent in 1998, forcing about
1.5 million people out of their jobs, the highest number since
the 1950-53 Korean War, Yonhap said.

One key issue in the negotiations was an IMF demand for an
outright shutdown of 12 debt-ridden merchant banks teetering on
the brink of bankruptcy, it said.

South Korea also agreed to open its bond market wider to
foreign investors, Yonhap said.

South Korea is the fourth Asian country to turn to the IMF for
help so far this year. The Philippines, Thailand and Indonesia
now are receiving assistance from the IMF.

South Korea's financial crisis was brought on by a slew of
corporate failures that put enormous strain on the banking
system. Bad loans, now estimated at US$26 billion, sent the
Korean currency plunging against the U.S. dollar.

With credit ratings down, Korean banks, unable to borrow
abroad, swarmed into the domestic foreign exchange market,
fueling a currency crisis.

Korean banks have difficulty servicing short-term debt. More
than two-thirds of South Korea's $110 billion debt is due in a
year.

The uncertainty drove the Korean stock market down further
Monday, with its key index dropping 14.70 points, or 3.6 percent,
to close at 393.16. The nation's currency also sank lower,
finishing the day at 1,187 to the dollar. It closed Friday at
1,170.