Seoul turn to IMF as crisis worsen
Seoul turn to IMF as crisis worsen
SEOUL (Reuters): South Korea sought yesterday a loan of some $20 billion from the International Monetary Fund (IMF) to overcome its deepening financial crisis and forecast a painful period of restructuring for one of Asia's vaunted "Tiger" economies.
"We accepted the advice from the IMF and our friendly nations and we decided to ask for the IMF loans," Finance Minister Lim Chang-yuel told a news conference.
"The size of the loans will be discussed. But the IMF and ourselves think that $20 billion would be enough to solve the difficulties," said Lim, who only took over as Finance Minister on Wednesday after the abrupt resignation of his predecessor.
He said conditions of the assistance, including the size and terms of the lending, would be determined by the IMF and the participating countries. An IMF team would arrive next week to discuss the details.
"I think we can get the loans three or four weeks after we reach the agreement," said Lim, who once served as an IMF executive director.
But he acknowledged there would be pain to go with the IMF gains.
"On the other hand, the Korean economy is expected to undergo a painful process of structural adjustment.
"The macroeconomic policies and fiscal operations are expected to be constrained by the conditionality of the IMF assistance, while the financial sector restructuring will be accelerated."
He appealed for public understanding.
"To overcome the current difficulties and future challenges, the full cooperation of the people of Korea is called for," Lim said.
He said he was also in touch with Japan about assistance but declined to give details of those talks.
"I believe Japan is going to cooperate quite closely with us," Lim said.
Lim had a telephone conversation yesterday with his Japanese counterpart, Hiroshi Mitsuzuka, said Eisuke Sakakibara, vice minister for international affairs in Japan's Finance Ministry. But Sakakibara said he could not comment further.
Lim's announcement followed talks he held earlier in the day with visiting IMF Deputy Secretary General Stanley Fischer.
"The IMF and other allies have recommended Korea to seek a financial assistance from the IMF in order to secure firm stability in the financial market and to reinforce our reform efforts," Lim said.
"The Korean government has finally decided to accept such a recommendation," he said.
"Financial assistance from the IMF is typically extended to countries in need of short-term capital. As in the cases of Mexico, Thailand and Indonesia, the financial assistance from the IMF will be accompanied by financial support from other participating countries."
He said the IMF loans would stabilize the financial markets "by improving Korea's international credit rating and clear the liquidity shortage problem".
South Korea's financial crisis has been caused by a string of corporate failures that have put enormous strain on the banking system at a time when the won was plunging against the dollar. President Kim was to address the nation on Saturday about the country's economic situation.
South Korea's request for some $20 billion in help from IMF is the latest plea to the world financial watchdog in a year that has seen accelerating demand for IMF bail-outs.
Crisis -- Page 4
Bailout -- Page 10