News Brief: IMF Executive Board Completes 1st Review of Korean Program: Activates Supplemental Reserve Facility
IMF News, December 18, 1997
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- News Brief: IMF Executive Board Completes 1st Review of Korean Program: Activates Supplemental Reserve Facility
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- Published: December 18, 1997
Review outcome and financing made available
- The IMF’s Executive Board completed its review of Korea’s implementation of the economic program.
- As a result of completing this review, a further SDR 2.6 billion (about US$3.5 billion) is available to Korea under the SDR 15.5 billion (about US$21 billion) stand-by credit approved December 4, 1997 (see Press Release 97/55).
- The IMF had already made available SDR 4.1 billion (about US$5.5 billion) under the three-year stand-by credit.
- The total amount of financing available to Korea under the program, which remains exceptional, has not changed.
Supplemental Reserve Facility (SRF) — terms and purpose
- The latest credit is being made available under the terms of the newly-created Supplemental Reserve Facility (SRF).
- The SRF was put into place on December 17, 1997 (see Press Release 97/59).
- Purpose: to provide financial assistance to IMF members experiencing exceptional balance of payments difficulties due to a large short-term financing need resulting from a sudden and disruptive loss of market confidence reflected in pressure on the capital account and the member’s reserves.
- Financing characteristics under the SRF:
- Provided at shorter maturities than resources available under stand-by and extended Fund facility (EFF) credits.
- Provided at a higher rate of charge than resources available under stand-by and EFF credits.
- The change in terms under the SRF was anticipated at the time the Korean program was drawn up and is reflected in Korea’s Letter of Intent.
Korean policy actions and IMF assessment
- Quoted statement by Michel Camdessus, Managing Director of the IMF:
- "The Korean authorities are moving swiftly to implement the economic program approved by the IMF on December 4, 1997."
- Actions cited:
- The interest rate ceiling is being raised.
- The won is now freely floating.
- Important actions have been taken on the fiscal front.
- Action plans for restructuring the financial sector, constituting the cornerstone of the program, are proceeding.
- The IMF "looks forward to continued close cooperation with the authorities in this critical area."
Key statistics and references from the brief
- SDR 2.6 billion (about US$3.5 billion) newly available.
- SDR 15.5 billion (about US$21 billion) total stand-by credit approved December 4, 1997.
- SDR 4.1 billion (about US$5.5 billion) already made available under the three-year stand-by credit.
- SRF establishment date: December 17, 1997.
- Related press releases: Press Release 97/55 and Press Release 97/59.
International Monetary Fund — News Brief, December 18, 1997.