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Thursday, 23 August, 2001, 05:12 GMT 06:12 UK
Seoul pays off its IMF debts
South Korean President Kim Dae-jung, centre, inspects a Kia Motors Corp. car assembly line in Kwangmyong
South Korean companies are hard hit by the global slowdown
By Caroline Gluck in Seoul

South Korea has fully repaid the last instalment of a multi-billion dollar loan from the International Monetary Fund.

IMF Managing-Director Horst Koehler
Mr Koehler says he is confident that President Kim will continue with economic reform
The $19.5bn loan was part of a $58bn rescue package for South Korea at the height of the Asian economic crisis.

President Kim Dae-jung said that the end of IMF repayments meant that South Korea will now become a lending country, with its international status and credibility boosted.

Three years ago, with its economy on the verge of collapse, South Korea turned to the IMF for a multi-billion dollar bail-out.

Painful restructuring

The loan was the biggest in the IMF's history and it came with strict conditions, demanding government reform of the country's financial sector, reforms of the family-owned industrial giants, known as chaebol, and economic liberalisation.

The decision sends the world a message that Korea has now completely overcome the crisis that required the intervention of the IMF and that it has fully recovered its 'economic sovereignty'

South Korean Government statement
Painful restructuring programmes were put in place.

But now the Seoul government is paying the last instalment nearly three years ahead of schedule.

It should be a moment for congratulations.

IMF Managing-Director, Horst Koehler, said it was a major milestone and a testimony to the Korean economy's rapid recovery and stabilisation from the 1997 financial crisis.

But the mood in South Korea is more sombre.

The country is grappling with a new economic slowdown and the government's popularity ratings continue to fall.

This week the central bank issued figures showing the country's year-on-year growth slowed to 2.7% in the second quarter - the lowest since early 1999.

Many economists speak of reform fatigue, despite the fact that the government's restructuring programme is far from finished.

Further reforms expected

But with elections next year, few believe that further painful reforms will be pushed through by the current administration.

The sale of the bankrupt Daewoo Motor Company to the US car giant General Motors still hangs in the balance.

Exports are falling, with South Korean companies hard hit by the US and global slow-down.

South Korea is still doing better than many of the other Asian tiger economies but there is still a long way to go before it returns to pre-crisis growth levels.

The BBC's Caroline Gluck
"The IMF rescue package was the biggest in its history"
Hank Morris, Industrial Research Consultants
"The payment can easily be afforded"
See also:

01 Aug 01 | Business
Korean exports slump
20 Mar 01 | Business
South Korean economy slows
19 Mar 01 | Business
Growth to slow in Asia
16 Mar 01 | Business
Dark clouds over Asia
21 Dec 00 | Business
South Korea strikes spread
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