This information was compiled to provide insight into Korea’s request of IMF funds and to provide economic prospects.
In Korea, the bankruptcy of several large enterprises and the financial crisis that rocked South East Asia has exposed the weakness of the economic structure. However, the government failed to show volition and the competence required to solve problems, which resulted in the rapid decline of the trust that the international community put in the finance sector. International financial institutions judged that the Korean economy showed little hope for short-term recovery and decided to collect loans, which led to a foreign currency crisis. The efforts made in the meantime to promote international trustworthiness and to ensure foreign currency were not sufficient to stabilize the situation. As a result, the Korean government requested the support of the IMF’s liquidity control fund to prevent a serious economic crisis.
The agreements with the IMF said that the international trade deficit must remain at 1% of GDP in 1998 and in 1999, market price at 5% and growth rate at 3%. Moreover, it asked to keep the fund stringency basis, manage the elastic exchange rates policy and limit the government’s market intervention in order to obtain rapid changes. In the financial sector, it asked to ensure the independence of the central bank, to install financial supervisory institutions to write financial statements for corporations and to have them audited by external institutions. The main focus of the program was to eliminate insolvent companies, accelerate opening and foreign investments, obtain trade liberation by abrogating trade subsidies and import approval systems. These measures were designed to strengthen employment insurance systems and the opening of information.
With the introduction of the IMF fund, the Korean economy is expected to accomplish a growth rate of 6.5%, fall abruptly the following year and go on to make a gradual recovery. This will also decrease the unemployment rate. In conclusion, the IMF’s intensive programs will result in painful times in the short-term but various macro indicators and numbers will be recovered over the course of the restricting process. Therefore, national cooperation and participation are both crucial to solving the crisis and avoid having a negative image on the international scene.
IMF 자금지급 합의내용에 대한 설명자료(IMF agreements)
|Subject Country||South Korea(Asia and Pacific)|
|Subject||Economy < Financial Policy|
|Holding||재정경제원; 한국개발연구원 국제정책대학원|