Korean president, finance minister vow to meet IMF conditions
SEOUL, South Korea (AP) _ With its currency and stock market sliding rapidly, investors are wondering if they can trust South Korea to honor the terms of the world’s largest economic bailout.
The country’s lame-duck president, Kim Young-sam, and his finance minister rushed to separate podiums Thursday to answer that question with an emphatic yes.
But with a presidential election only a week away, the leading candidate, Kim Dae-jung, cast doubt on their response.
``We question how (the IMF deal) will benefit our country. We doubt that we can honor some of the terms of the deal,″ said Kim Won-gil, the candidate’s spokesman.
That served to intensify a dispute over whether South Korea should renegotiate its $57 billion deal with the International Monetary Fund, which many Koreans regard as humiliating and too harsh.
The result, analysts said, is that investors will remain uneasy and the currency and stock market turmoil will likely continue until after next Thursday’s election.
``South Korea is increasingly losing confidence among foreign investors,″ said Chang Dong-yuel, a foreign exchange trader at the First National Bank of Chicago. ``Politicians .... are turning a deaf ear while companies are dying.″
The IMF loan comes with strict policy controls that will stem economic growth, cut budgets, raise taxes and interest rates and open domestic markets wider to foreign imports _ measures South Koreans fear will cost them jobs they’ve been accustomed to holding for life.
To international lenders _ and most South Korean economists _ the prescriptions simply mean the country will have to measure up to international standards.
But to a people with long memories of foreign invasions and fiercely proud of their recent economic achievements, the IMF’s terms were tantamount, as one major Seoul newspaper put it, to ``giving up national sovereignty.″
Sensing an opportunity, Kim Dae-jung and another of the nation’s three major candidates quickly jumped on the bandwagon and said they would renegotiate the IMF deal if elected.
Independent political sources said the ploy helped Kim widen his gap this week against his closest challenger, Lee Hoi-chang, by a margin of 5 to 7 percent. Lee has said he will honor the country’s commitments to the IMF.
It is illegal to announce the results of opinion polls during the nation’s official 22-day campaign. Before the campaign started, Kim and Lee had been in a dead-heat race.
``Mr. Kim Dae-jung is ruining the economy by making foreign lenders more reluctant to provide funds,″ claimed Lee, the standard bearer of the majority Grand National Party.
For a second straight day, currency trading was halted four minutes after the market opened as the Korean won dropped by 10 percent _ its permissible daily limit _ to a new record low of 1,719.8 against the dollar.
Stock prices also closed sharply lower, falling 22.48 points, or 5.6 percent, to 377.37.
South Korea needs $20 billion to repay short-term loans that come due by year’s end.
Finance Minister Lim Chang-yuel said the country has $10 billion in immediately usable foreign reserves, and at least $8.6 billion more will arrive this month from the IMF, the World Bank and the Asian Development Bank and other foreign banks. He also said many foreign lenders have agreed to roll over their loans.
``I am confident that we can manage the situation,″ Lim said.
Earlier, President Kim said the government will honor the IMF deal ``without hitch.″ And his finance minister said he had received written assurances from the three leading presidential candidates that they would abide by the IMF’s terms, campaign promises to the contrary.
South Korea should use the IMF deal as an opportunity to overhaul South Korea’s ailing economic structure, the president said.