News Brief No. 99/17

News Brief: IMF Completes Review and Approves US$245 Million Credit Tranche for Korea

April 7, 1999

Stanley Fischer, First Deputy Managing Director of the International Monetary Fund (IMF), made the following statement today. "I am pleased to announce that the Executive Board of the IMF, in support of the Korean government’s economic program, today approved completion of the fifth quarterly review under the stand-by credit and the release of a SDR 181 million (US$245 million) credit tranche for Korea. There are welcome signs that the Korean economy is beginning to emerge from last year’s severe downturn. Recent economic data point towards a modest recovery, which will pick up pace during the course of the year. Interest rates have fallen further, and the overnight call rate is now below 5 percent. It also encouraging that international investor confidence toward Korea continues to improve," Mr. Fischer said.

However, he cautioned that the Korean economy still faces several hurdles. "Domestic demand remains weak and unemployment continues to rise. In response, the authorities have taken strong measures to accelerate fiscal spending, including welcome initiatives to protect the unemployed. Meanwhile, Korea continues to make good progress in financial restructuring, including the prospective sale of two local banks to foreign institutions. However, corporate restructuring, especially for the top five chaebol, needs to be accelerated. Korea’s achievements to date have been impressive, but improved economic conditions must not deflect attention from the unfinished reform agenda," Fischer said.