Korea and IMF mull emergency loan plan
By Foster Klug |
July 26, 2010, Monday
|
Print Edition
Print Edition
BITTERNESS still lingers in South Korea over a painful international financial bailout in 1997. Now, a powerful Seoul wants to help other countries needing aid.
South Korea is working with the International Monetary Fund on a new emergency loan program to reduce the stigma that countries have faced when dealing with the global lending agency. Officials hope to unveil it at a November summit of the Group of 20 major industrial countries that Seoul is hosting.
Details are still being worked out, but the South Korean proposal addresses some fundamental problems: Applying for an IMF loan can be seen as an admission that a country's economic health is even worse than the most pessimistic forecasts. That can cause turmoil in financial markets. Governments can also face anger at home over what are often perceived as humiliating conditions attached to the loans.
The new proposal aims to get around these hurdles by having the IMF identify a group of countries with otherwise healthy economies that have been hit by a sudden, quick-spreading global financial crisis.
The fund would then offer short-term, simultaneous loans to take care of liquidity problems and quell market turbulence in those countries. This would eliminate the need for a country to swallow its pride and approach the IMF on its own.
The program isn't for countries on the brink of defaulting on their debts.
South Korea is working with the International Monetary Fund on a new emergency loan program to reduce the stigma that countries have faced when dealing with the global lending agency. Officials hope to unveil it at a November summit of the Group of 20 major industrial countries that Seoul is hosting.
Details are still being worked out, but the South Korean proposal addresses some fundamental problems: Applying for an IMF loan can be seen as an admission that a country's economic health is even worse than the most pessimistic forecasts. That can cause turmoil in financial markets. Governments can also face anger at home over what are often perceived as humiliating conditions attached to the loans.
The new proposal aims to get around these hurdles by having the IMF identify a group of countries with otherwise healthy economies that have been hit by a sudden, quick-spreading global financial crisis.
The fund would then offer short-term, simultaneous loans to take care of liquidity problems and quell market turbulence in those countries. This would eliminate the need for a country to swallow its pride and approach the IMF on its own.
The program isn't for countries on the brink of defaulting on their debts.
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