Revived Korea to pay back $7.7b to IMF

Revived Korea to pay back $7.7b to IMF

SEOUL (Reuters): South Korea said on Monday it planned to pay off US$7.7 billion of its massive loan from the International Monetary Fund by the end of this year as officials expressed concerns the country had a surfeit of dollars.

President Kim Dae-jung and top economic officials painted a rosy picture of an economy, badly wounded in Asia's currency and debt crisis, that was well on its way to recovery.

"We have paid $4.8 billion back to the IMF from which we had borrowed $19 billion. We plan to repay an additional $7.7 billion within this year," Kim Dae-jung said in a speech to a forum of U.S. pension fund managers.

The loans were part of a record $58.35 billion rescue package that the IMF arranged for Korea in December 1997.

The aid money and a big infusion of both direct and portfolio foreign investment has handed officials quite the opposite problem they faced little more than a year ago -- an appreciating currency that threatens export competitiveness.

The foreign exchange market has been awash in dollars and on Monday officials tried to talk the won down.

"It is undesirable for the won to rise further," said an official in a foreign exchange-related government office. "The government is seeking strong counter-measures to control the supply and demand of the dollars," he said.

The dollar was trading at around 1,223 won on Monday. At the height of the crisis at the end of 1997, the won was more than 1,900 to the dollar.

A finance ministry official said state banks and corporations would soon be buying dollars to stem the won's rise.

Many of those dollars have been brought in by foreign investors, who helped key yet another rally on the Korea Stock Exchange. The Korea Composite Stock Index rose 2.22 points or 0.32 percent to close at 689.64 on Monday after briefly breaching the psychological 700 barrier.

The index has risen 13 percent over the past eight sessions as falling interest rates draw foreign investors.

The perceived need to keep the won from appreciating too fast is one of the reasons the government is promptly repaying its dollar-denominated IMF loan, analysts said.

Another reason is to shore up its sovereign credit ratings, which international ratings agencies have only recently upgraded to just above investment grade.

Thomson BankWatch said on Monday it has affirmed South Korea's sovereign risk rating of "BBB", with a "stable" rating outlook. "There are some signs of economic recovery, more so than in Thailand, even though the process is still unfolding slowly," the international ratings agency said in a statement.