Aim of Korea Program Is to Stanch Immediate Crisis, Permit Return to Stability and Growth

• Pages: 386-388

Page 386

Following are edited excerpts from a press conference given by IMF First Deputy Managing Director Stanley Fischer on December 5.

FISCHER: The crisis in Korea unfolded with overwhelming speed and severity. The negotiating team led by Mr. Neiss left Washington for Seoul only 10 days ago, and we have reached agreement with the Korean authorities on a strong program in record time. The agreement with IMF management and staff was reached in the early hours of December 3, two days ago. IMF Managing Director Michel Camdessus briefed the press in Seoul and, soon after, he briefed the IMF Executive Board on the agreement by a videoconference link.

The authorities' letter of intent and the staff report on the economic program were sent from Korea and issued to Executive Directors on December 3 and in the early morning of December 4, respectively-all these being unprecedentedly rapid speeds at which these complex documents were written and distributed.

These were very difficult negotiations, as the program required a quantum leap in policies that the authorities had been planning to implement gradually over a number of years. Their decision to join the Organization for Economic Cooperation and Development obviously implied that their capital markets would be opened and that a lot of the other structural measures now in the program would be implemented in due course-but they now have had to be implemented much more rapidly.

The drama of this negotiation resulted from the realization, when the mission arrived in Seoul on Wednesday, November 26, of the alarming state of the foreign reserves. As the Managing Director has said, when we were invited in, Korea was possibly 10 days away from a financial catastrophe, and the urgency to compress negotiations into one week required a ruthless concentration on priorities.

The heart of the program is in the area of financial restructuring.

We focus, naturally, on the difficulties confronting our staff, and they were formidable. The Korean authorities similarly operated under enormous difficulties. Their chief negotiator was the new deputy prime minister and finance minister, Lim Chang-yuel, who fortunately had been an Alternate Executive Director at the IMF and the World Bank in the 1980s, so he was familiar with these institutions. But he came in just over two weeks ago into a situation that must have been far worse than he could have imagined. He was a very tough negotiator-which is only to be expected-and I believe that the agreement reached shows a lot of courage and wisdom for the future of the Korean economy.

The program aims to stanch the crisis in the immediate run and permit a...