December 24, 1997
RR-2130

Statement by the Finance Ministers and Central Bank Governors of the Potential Participants in the Supplemental Financial Assistance Package for Korea

We welcome the announcement by the Korean authorities of additionalmeasures to strengthen macroeconomic policy and accelerate structural reforms, particularly inthe financial sector. This enhanced program of prior policy actions and reform is an importantstep that will contribute to the restoration of financial stability and a return to growth.

We also welcome the decisions by the World Bank and the Asian Development Bank todisburse a total of $5 billion this week in support of a program of structural reforms and financialsector restructuring.

In support of Korea's enhanced policy program, and in the context of a significant voluntaryextension of the maturities of existing claims by international bank creditors on Korean financialinstitutions and adequate progress by Korea toward accessing new sources of private internationalfinance, we would be prepared to support action to advance by early January existingcommitments of official finance, including the acceleration of IMF disbursements, and thedisbursement of a substantial portion one third ($8 billion) of the supplemental financialcommitments made by Australia, Belgium, Canada, France, Germany, Italy, Japan, theNetherlands, New Zealand, Sweden, Switzerland, the United Kingdom, and the United States.

In this context, together with the other participants in this program, we have agreed on a setof operational conditions for the provision of supplemental finance to the Korean authorities. Under this common approach, the availability of this supplemental finance will be conditioned onthe forceful and consistent implementation of the policies agreed by the Korean authorities in thecontext of the programs supported by the IMF, the World Bank and the Asian Development Bankand any additional policies that are necessary; will carry appropriate market-related interest rates;and will be made available in the form of renewable short-term instruments.

The international community shares an important interest in the success of Korea's efforts torestore economic and financial stability. A successful program will require a continued sustainedcommitment to reform by the Korean authorities, appropriate financial support from the officialsector as outlined above conditioned on the strong policies necessary to restore confidence, and asuccessful effort by the Korean authorities to secure longer term financing from private creditorsand the international capital markets.