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Lim told reporters that the government's earlier proposal of a $20 billion rescue loan from the IMF was no longer valid.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