page_title: South Korean IMF (International Monetary Fund) in 1997
section_title: Key Events and Description
hierarchical_section_title: South Korean IMF (International Monetary Fund) in 1997 / History / Key Events and Description
caption_attribution_description: English: Economic Council of Korea and the IMF (1964) -1
context_page_description: The South Korean IMF is an event when South Korea, which was amidst of a foreign exchange crisis, signed a memorandum of understanding with the International Monetary Fund on December 3, 1997. The IMF required for the introduction of policies such as fiscal and financial austerity, high-interest rates, the dissolution of chaebols, layoffs and floating exchange rates as conditions for bailouts, and the Korean government, which had to prevent the nation from going bankrupt immediately, was forced to accept those demands. As a result, corporate bankruptcies, mass unemployment and the crisis in the real economy accelerated further. The term is called the IMF, the IMF economic crisis, the IMF crisis and so on, but technically defining, the name IMF itself is a misrepresentation because it does not contain the meaning of the foreign exchange crisis. However, it is often used by the local media and other media due to its symbolism that South Korea requested bailout funds from the IMF.
context_section_description: Step 1. Before IMF funding (1)
  ● An export economy centred on the light industry (the 1960s) → Fostering heavy and chemical industries (the mid-1980s)
  ● Accumulated current account deficits and increased external debt between 1994 and 1997
  ● The occurrence of a series of bankruptcies of large corporates after the early 1997s
  ● Recovering temporary stability in the financial market in May and June
  ● 02.07. 1997: The abandonment of Thailand's multiple-currency basket exchange rate system
  Step 2. Before IMF funding (2)
  ● 15.07. 1997: Agreement to suspend bankruptcy of Kia which was one of ten major companies
  ● 11.09. 1997: Korea Development Bank succeeded in issuing $1.5 billion foreign currency bonds
  ● Southeast Asian financial crisis spread across Asia at the end of October
  ● During November 1997: Rapid reduction in foreign exchange reserves, facing a crisis of sovereign default
  Step 3. Negotiation with the IMF (major agreement)
  ● Macro-political field: Focusing on improving current account and attracting foreign investment smoothly
  ● Financial restructuring: Comprehensive restructuring to operate the financial system more soundly and efficiently
  ● Corporate restructuring: Improvement of corporate financial structure, reduction of bank borrowing costs during corporate financing, etc.
  ● Liberalization/opening policy: Full promotion of trade liberalization, foreign exchange liberalization and capital liberalization
  ● Reform of labor-management relations: Increase of flexibility in the labor market, strengthen the function of the employment insurance system
caption: Economic Council of Korea and the IMF
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