Front Page







World Summary

On Air


Talking Point


Text Only


Site Map

Thursday, December 25, 1997 Published at 12:54 GMT


South Korea saved by $10bn rescue
image: [ Money will help to avert economic crash in Seoul ]
Money will help to avert economic crash in Seoul

The world's seven largest economic powers and the International Monetary Fund have pledged to give $10bn to South Korea to stave off economic crisis.

Additionally six leading banks in the United States have said they are prepared to come up with money to supplement the aid.

The banks say they believe that a private-sector initiative offers the best solution to South Korea's short term problems.

News of the bail-out comes a day after the Government admitted its foreign currency debts exceeded $200bn. It was agreed following frantic negotiations with the IMF and the US Treasury Under-Secretary, David Lipton.

Mark Malloch-Brown, of the World Bank: "It's a matter of jumpstarting the economy" (2'50")
Two billion dollars will arrive next week, and $8bn in early January.

In return for the cash, Finance Minister Lim Chang-Yuel said here Seoul had finally bowed in tough last-minute negotiations to a massive IMF-demanded financial restructuring.

Finance Minister Lim Chang-Yuel told reporters in the capital, Seoul, that an economic reform programme will be introduced, making clear that Seoul had finally bowed to a no-nonsense, wide-ranging restructuring demanded by the IMF.

"Today the South Korean Government and the IMF negotiating team agreed to strengthen and speed up economic reform, focusing on monetary policy, financial reform, the opening of the capital market, trade policy and foreign exchange management," Mr Lim said.

"This will lay the ground for South Korea to carry out restructuring under the IMF framework," he added.

The G7 group of industrialised countries "and other advanced countries" would also pay risk funds to the tune of $8bn in January, he added.

Stock market worries

BBC correspondent Charles Scanlon reports on how Koreans are facing up to disaster
South Korea's near-default on foreign loans had panicked the world's markets in what has widely been seen as dangerous brinkmanship between Seoul and Washington over the stiff clauses of a $60bn IMF-led bail-out.

A statement released in Tokyo by G7 finance ministers and their central bank governors "welcomed" Seoul's announcement of "additional measures to strengthen macro-economic policy and accelerate structural reforms".

South Korean share prices closed 4% down on Wednesday, after the $3bn emergency loan from the World Bank steadied the won and reports that the Government may close more merchant banks by mid-January.

[ image: The World Bank pushed through a $3bn loan]
The World Bank pushed through a $3bn loan
After an overnight meeting of a 12-member crisis task force, Seoul also agreed to ease restrictions on foreign exchange transfers and commercial loans from abroad.

The task force decided to ease barriers on foreign ownership of banks and allow immediate lay-offs at the time of mergers and acquisitions.

Seoul will next week announce more reforms aimed at reviving South Korea's wrecked credit ratings, a task force spokesman said.


Back to top | BBC News Home | BBC Homepage


  Relevant Stories

23 Dec 97 | Business
World Bank acts quickly to aid South Korea

23 Dec 97 | Despatches
Central Europe fears for Korean investment

19 Dec 97 | Special Report
Kim Dae Jung: New man, new policies?

19 Dec 97 | Special Report
Opposition leader wins South Korea poll

19 Dec 97 | World
South Korean president asks for nation's support

  Internet Links

Korea Stock Exchange

International Monetary Fund

World Bank

Government of Korea

The BBC is not responsible for the content of external internet sites.
In this section

Microsoft trial mediator welcomed

Vodafone takeover battle heats up

EU fraud: a billion dollar bill

NatWest bid timetable frozen

No longer Liffe as we know it

France faces EU action over electricity

Inquiry into energy provider loyalty

The growing threat of internet fraud

Christmas turkey strike vote

Brown considers IMF job

Train robbery game hope for SCi

From Sport
League to rule on Sky shares

Mannesmann fights back

Online share dealing triples

Chinese imports boost US trade gap

Pace enters US cable heartland

The rapid rise of Vodafone

Storehouse splits up Mothercare and Bhs

Brown's bulging war-chest

The hidden shopping bills

Europe's top net stock

House passes US budget

Rate fears as sales soar

Safeway faces cash demand probe

Mitchell intervenes to help shipyard

Maxwell pledge to pensioners

Power cuts spark union warning

New factory creates 500 jobs

Drugs company announces 300 jobs

Oil reaches nine-year high

'Asian management culture must change'

US 'prepared for Millennium Bug'

Gucci on a spending spree

Business Contents

Your Money
Market Data
Business Basics