WASHINGTON -- International Monetary Fund Managing Director Michel Camdessus said yesterday that the IMF plans to rush $2 billion to South Korea on Dec. 30 to help stabilize the nation's financial and currency markets.
The money is an expedited payment coming before the next scheduled installment of another $2 billion on Jan. 8 if reforms by the South Korean government pass muster. It won't add to the almost $60 billion bailout put together by the IMF earlier this month. It will just replace an installment that had been set for later in 1998.
The IMF payment comes in addition to $8 billion in expedited loans from the Group of Seven nations to South Korea to help it cope with its debt crisis.
The G-7, the world's seven major industrial powers -- Canada, France, Germany, Italy, Japan, the United Kingdom and the United States -- announced the move yesterday and said they will provide the loans early in January, the ministry said.
In exchange for the Dec. 30, $2 billion IMF disbursement, the Korean government pledged to intensify efforts to overhaul its financial system, liberalize its capital account, and strengthen its monetary policy to stabilize its currency.
South Korea also will accelerate market-based reforms to halt the outflow of short-term capital and further open its market to imports to increase competition, the IMF said in a statement.
There was a "significant voluntary increase in rollovers or extension of the maturities of existing claims by international bank creditors on Korean financial institutions" that led to the Camdessus' plan to recommend the accelerated payment to the IMF board, the IMF statement said.
Korea received $3.58 billion from the IMF on Dec. 18 after passing the first review by the fund's executive board and $5.56 billion on Dec. 5. Both disbursements were part of the $21 billion IMF line of credit.
On Tuesday, the World Bank delivered $3 billion to South Korea for reforming its banking system. The loan, the biggest ever by the lending institution, will free up financial resources, allowing South Korea to meet further short-term debt repayment.
The World Bank offered to provide up to $10 billion as part of the $60 billion bailout package.
The Asian Development Bank promised to deliver $2 billion today as part of a $4 billion loan to be delivered over the next 2 1/2 years. The second installment of $1 billion was expected to be delivered Jan. 5.
Before the yesterday's announcement, the won rebounded in Korean trading from a record low set yesterday, rising 6.9 percent against the dollar to 1,836 won.
South Korean stocks fell for a third day yesterday, however, amid concerns that record interest rates pushed many companies closer to insolvency. The benchmark Kospi index of 775 companies fell 15.14, or 4.1 percent, to 351.22 after falling as much as 6.2 percent.
South Korean Finance Minister Lim Chang Yuel said Japan would provide $3.3 billion to the G-7 loan package, to be delivered by Jan. 30. The United States and France will each provide $1.6 billion, and the rest will come from other G-7 nations.
Those funds represent about one third of the $24 billion pledged by the United States and other nations that was intended to be a second line of defense after the IMF and other agencies provided funds first.
Pub Date: 12/25/97