South Korea plans to provide an extra 30 billion dollars to help banks, businesses and the currency market caught up in the ongoing global credit crisis, a report said Saturday. Yonhap news agency quoted unidentified officials of the finance ministry as saying the capital injection was at the core of a package of measures set to be unveiled on Sunday by the government in a bid to stabilise the economy.
Twenty billion dollars will be provided for small and medium-sized exporters through the state-run Korea Exim Bank, the agency said, although it was unclear if this would be in the form of loans. The bank has already provided five billion dollars to South Korean exporters to makeup for the money that their clients owe them.
The government will also funnel another 10 billion dollars into the won-dollar currency swap market, the report said. The central bank has said that from Tuesday it would supply dollars directly to banks suffering from dollar shortages through competitive bidding in the swap market. Smaller firms have been hit by high commodity prices, slowing exports, sluggish domestic consumption and a volatile foreign exchange rate.
But commercial banks have been reluctant to provide them with liquidity because of financial market uncertainties here and abroad. Minster of Strategy and Finance Kang Man-Soo indicated Friday that the package could also include state guarantees for interbank loans, tax cuts and measures to increase spending. He said Seoul was ready to take "preemptive, swift and sufficient" measures to calm the foreign exchange market.
The won has been Asia's worst performing major currency this year, falling from 937 to the US unit on January 2 to 1,334 on Friday. The country's current account deficit, rising overseas debts and the departure of foreign investors from the local stock market have fuelled the fall.