World Bank, ADB may join IMF-led Korean bail

World Bank, ADB may join IMF-led Korean bail

SEOUL (Reuters): Saying US$20 billion would not be enough to
deal with a debt crisis, South Korea's Finance Minister said the
World Bank and the Asia Development Bank were also willing to
contribute to an IMF-led program.

"The South Korean government would welcome their
participation," Finance Minister Lim Chang-yuel told journalists
after meeting Hubert Neiss, head of the IMF delegation to South
Korea.

Neiss told Lim the two development banks had "actively
expressed interest" in joining the program to bail out the
world's 11th biggest economy, Lim said.

Neiss, who heads the IMF's Asia Pacific department, also told
the South Korean finance minister the IMF assistance would be
large enough to resolve the country's financial crisis.

Lim told reporters that the government's earlier proposal of a
$20 billion rescue loan from the IMF was no longer valid.

"Forget about the $20 billion figure," he told reporters,
adding the specific amount would be determined in working-level
negotiations with the IMF.

After weeks of denying it needed external help, South Korea
sought assistance from the IMF on Nov. 21.

Lim said World Bank and ADB involvement would broaden South
Korea's horizons for solving its financial problems with
international support.

Cooperation with the United States and Japan remains another
important factor in the formulation of the bailout package, he
said.

Lim said the chief IMF negotiator promised to speed up South
Korea's loan application.

He also said the South Korean situation would be on the top of
the agenda for a regional ministerial conference to be held in
Malaysia next week.

Lim said financial chiefs from South Korea, the United States,
China, Japan, Australia, Hong Kong and other Southeast Asian
countries would discuss the region's financial troubles that
started in Southeast Asia several months ago and has now spread
to Northeast Asia.

Many analysts have estimated that Seoul would need $40 billion
to $60 billion to solve its financial crisis.

The IMF has already led two massive bailout programs -- for
Indonesia and Thailand -- in recent months. The Indonesian
program could be a model for South Korea, analysts have said.

The Indonesian deal comprised about $23 billion from
international institutions -- including $10 billion from the IMF
-- and some $17 billion from bilateral donors, to be used only if
things turned out much worse than expected. The United States
chipped in about $3 billion.

South Korea's deepening crisis was caused when foreign banks
began refusing to roll over South Korea's burgeoning short-term
debt after a string of corporate bankruptcies pummeled badly-
exposed banks.

The won plunged steeply as banks and corporations scrambled to
buy dollars to repay loans suddenly called in.

South Korea said its foreign debt as of March 1997 was $110
billion and about two-thirds of it was short-term, due in a year
or less.

Analysts estimate the debt has risen to $151 billion and a
series of downgrading by international ratings agencies has meant
it has suddenly become more expensive to service.