Moving to rescue an Asian economy for the fourth time this year, the International Monetary Fund pledged full support Friday to help South Korea emerge from its financial crisis.
IMF Managing Director Michel Camdessus said the help will involve the international community, an indication that individual nations, possibly Japan and the United States, will be included.
But Camdessus did not elaborate on the size of the total bailout expected nor on which other institutions or nations would participate.
Estimates of the amount South Korea needs range from the government’s $20 billion to private financial analysts’ $60 billion.
The IMF’s sister organization, the World Bank, said it did not expect to join the Korean program because the country’s per capita income is too high to qualify. The bank was part of a $23 billion package put together by the IMF for Indonesia this month.
The help for Korea most likely will be similar to the Indonesia bailout, which involved loans from the IMF and the Asian Development Bank, backed up by a second line of potential loans from the United States, Japan and other rich nations. The United States’ share of the Indonesian arrangement was $3 billion.
Rep. Jim Saxton, R-N.J., chairman of Congress’ Joint Economic Committee, said he was concerned about the cost to the United States.
“Even if the IMF is designated as the first line of defense,” Saxton said, “the astronomical bailout figures now in the media clearly suggest U.S. funds could be involved. If this is the case, then Congress and the taxpayers have a right to know the terms and any related U.S. financial commitments.”
Camdessus’ statement said, “The management of the IMF has been in contact with the Korean authorities in recent weeks on ways to overcome the financial crisis, which has arisen despite sound macroeconomic trends.”
He said the financial measures announced by the South Korean Finance Ministry Wednesday will “provide a good basis to begin the needed restructuring of the financial system.”
As in Indonesia and Thailand, other Asian economies that have run into financial troubles this year, the measures could mean tax increases and other belt-tightening measures for the Korean people as well as government budget cuts.
Camdessus said an IMF mission, which will negotiate terms of the rescue package, will arrive in Seoul next week. His deputy, Stanley Fischer, met with Korean officials in Seoul Thursday.
The largest rescue package the IMF has put together so far is $50 billion for Mexico in 1995 followed by Indonesia’s $23 billion and Thailand’s $17 billion in October.
MEMO: This sidebar appeared with the story: TOP ECONOMIES Following are the world’s top 11 economies, based on gross domestic product for 1995: 1. U.S., $6.95 trillion 2. Japan, $5.10 trillion 3. Germany, $2.41 trillion 4. France, $1.59 trillion 5. Britain, $1.1 trillion 5. Italy, $1.08 trillion 7. China, $697 billion 8. Brazil, $688 billion 9. Canada, $568 billion 10. Spain, $558 billion 11. Korea, $455 billion