South Korea Swallows Bitter Pill

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After three days of hemming, hawing and generally confusing the world, South Korean leaders have signed a letter of intent accepting a $57 billion bailout package from the International Monetary Fund. The measure, which would be the largest bailout the fund has ever provided, now goes to the IMF board for approval.

In accepting the money, South Korea agreed to stringent IMF conditions. The 1998 growth rate must be cut to 3 percent; inflation must be kept below 5 percent; and the current-account deficit must be slashed to within 1 percent of GDP. There's precious little sugar with this medicine Seoul must maintain flexible monetary policies and allow temporary hikes in interest rates, says the IMF. A final bitter blow is that foreign investors will be allowed to increase their shareholdings in Korean companies to 50 percent this year up from the 26 percent limit currently allowed by the government.