South Korea, the world's 11th largest economy, has asked the International Monetary Fund for an emergency loan to help it out of a growing financial crisis.

A government official said talks had already begun on the size and conditions of the loan. He mentioned no figures, but the state media says the government will ask for up to $72 billion.

Until now ministers have ruled out seeking IMF help. The national currency, the won, stabilised after several consecutive days of falls.

The won lost 10% of its value on Thursday

The financial markets reacted positively to the news and in the first hour of trading, shares on the Korean Stock Exchange rose more than 1%.

President Kim Young-sam is to outline the government's plan in a televised speech on Saturday.

The BBC's Seoul correspondent says the decision to seek help from the IMF will be seen by the Korean public as a national humiliation.

IMF help "inevitable"

If an IMF loan is granted it will be the biggest ever made to an individual country.

Ministers had previously rejected seeking a loan, preferring to try to solve the crisis with bi-lateral help from other countries.

But a change of heart appears to have taken place after the currency fell a further 10% on Thursday, despite the unveiling of a programme designed to restore investors' confidence in the country's economy.

The unsuccessful rescue programme came after the President sacked his former Finance Minister, Kang Kyung-Shik, and another senior economic adviser, Kim In-Ho.

Analysts have been so far largely unimpressed by the government's efforts to address structural problems in the financial sector. They now believe that intervention by the IMF is inevitable.

Looming crisis

Investors have feared that South Korea could be heading for a financial crisis that would dwarf the turmoil in the South East Asian markets.

The dramatic fall in the currency on Thursday was partly due to pent-up demand for dollars from Korean companies.

Our correspondent added that the country's problems could be traced to over ambitious expansion during the boom years and an accumulation of huge debt by big industrial groups.

A string of corporate collapses following a slow-down in exports has left banks with billions of dollars in bad debts.

The South Korean economy is the size of the Malaysian, Thai and Indonesian economies combined, and should it falter, the impact would be felt around the world.

 
Hank Morris, Managing Director of Koryo Investment and Securities

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