ABSTRACT
In December 1997, the International Monetary Fund (IMF) reached an agreement with the government of the Republic of Korea, under which the IMF would provide the largest bailout package in its history and oversee a programme of reform and restructuring. The IMF would provide US$21 billion in stand-by credits over three years, while the World Bank and the Asia Development Bank would supply US$10 billion and US$4 billion respectively. A dozen of the world's industrialized nations agreed to provide a further US$20 billion in assistance (Suh 1998: 35). In return for the financial assistance, the South Korean government made a commitment to implement a programme of reform comprising:
... strengthened fiscal and monetary policies, far-reaching financial reforms and further liberalization of trade and capital flows, as well as improvement in the structure and governance of Korean corporations (Business Korea, March 1998: 41).
The short-term goals of the IMF programme were the attainment of 3 per cent economic growth in 1998, a reduction in the current account deficit to 1 per cent of gross domestic product (GDP), and curbing of inflation at or below 5 per cent at the consumer level. The policies also aimed to restore the value of the won, maintain high interest rates to attract foreign investment in the domestic capital markets, implement and operate a flexible exchange rate system, and build up the nation's foreign exchange reserves. The incremental release of funding from the IMF would be dependent on the successful implementation of the proposed reform measures (Kim Chongtae 1997a: 19 and Kwon 2000: 33).