The Palm Beach Post from West Palm Beach, Florida on December 4, 1997 · Page 4
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December 4, 1997

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The Palm Beach Post from West Palm Beach, Florida · Page 4

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West Palm Beach, Florida
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Thursday, December 4, 1997
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Page 4
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4A ' THE PALM BEACH POST THURSDAY. DECEMBER 4, 1997 Answers on IMF bailout of S. Korea rseiv looa Mitsubishi Includes automatic, air conditioning, power windows & locks. other Asian countries?. A: The IMF is making avail amFm cassette, dual airoags and mucn morel The package would bring to $103 billion the amount the world financial community has committed to propping up sagging economies in East Asia. able $10.1 billion to Indonesia; $3.9 billion to Thailand; and $1.1 billion to the Philippines. Addi tional pledges by the World Bank, LlCOJr J 36 MO. LEASE Q MITSUBISHI f5 j7W MOTORS Wt-. f?i Asian Development Bank and in- dividual countries brings the total rescue package for these three Built For Living." 56 mo. lease, $999 cashtrade down, first pymt $225 refundable security deposit. $347.50 dir. fee. banK fee, tax and tag due at Inception. Includes all rebates and Incentives. SCHUMACHER MITSUBISHI 3720 NORTHLAKE BLVD (Just East Of 1-95) G22-0220 8 S0AM-9PM Mon-Ffl 8: J0AM-6PM Sat Closed Sun The Space You Need Is Finally Here! By Bob Deans Palm Beach Post Washington Bureau ; WASHINGTON The International Monetary Fund is expected to approve today the centerpiece of the largest economic bailout package in history - a $55 billion plan to rescue the South Korean economy. ' The package would bring to $103 billion the amount the world financial community and the IMF have committed in recent months to propping up sagging economies in East Asia. . If all goes well financial disaster of even greater proportions will have been avoided and the struggling economies of South Korea, Indonesia, the Philippines and Thailand will emerge strengthened. : Here are some questions and answers about the IMF's Asia rescue effort. Q: What is the International Monetary Fund? i A: The Washington, D.C.-based IMF, 51 years old, is something like the United Nations of the global finance system. Its role is to monitor the financial systems of the 181 countries that are IMF members, provide advice and assistance where needed and to serve as a forum for members to consult with each other to promote stability and predictability within the world financial system. ; Q: How does the IMF help troubled countries? A: When a member country faces a financial crisis, it may ask the IMF to step in to try to arrest the damage and restore the con- Why add a room on, when you can add a room In? Save thousands over the expense of remodeling or a room addition, not to mention the hassle! We'll show you how to find the room in your rooms. investors the confidence that the ailing country won't default on its loans. Q: So when a country goes too deeply into debt, the IMF picks up the tab? A: Only temporarily. The IMF money is a backup to prevent an economically troubled country from defaulting on its loans. IMF loans must be repaid, however, usually within five years, along with interest and fees currently around 4.5 percent annually. Q: How much money is going to bail out South Korea? A: The IMF would provide up to $21 billion, if needed, over three years, under a plan to be voted on by the Fund's directors today. In addition, the IMFs sister institution, the World Bank, has pledged $10 billion in loans. A similar development institution, the Manila-based Asian Development Bank, has promised another $4 billion. If those pledges aren't sufficient to stabilize South Korea's economy, other countries have collectively agreed to provide up to $20 billion ($5 billion from the United States) in additional loans, if needed, bringing the total package to $55 billion. Q: What's been pledged to fidence of commercial lenders and investors, often by providing loans. For a country to receive IMF assistance, its government must commit to policy reforms aimed at correcting the problems that caused the crisis. Some IMF loan money usually goes to help cushion an economy from the worst side-effects of the economic medicine it needs to get well. Q: Who funds the IMF? A: Countries are assessed a sort of membership fee based on their wealth. The United States, which has the world's largest economy, pays the largest IMF fees. Proportionately, the United States has the most votes about 18 percent of the total before the IMF's governing body. In addition, the IMF may borrow up to $24 billion from member nations a limit soon to rise to $40 billion if necessary. Q: How does an IMF bailout package work? A: The IMF is a bit like a cosigner standing behind countries that are facing difficulty paying their global bills mostly loans from commercial banks and other financial institutions. The IMF backing is aimed at giving commercial lenders and Asian nations to $48 billion. Q: Why should Americans help economic competitors? A: Economists and officials regard this as an investment in stability, a, sort of economic peacekeeping force. As the world's largest trading nation, the United States has an enormous stake in helping to maintain a stable global financial system. Left unchecked, instability could deteriorate into chaos, with the result being potential economic damage to U.S. companies, banks and investors. Q: Why not just let the chips fall where they may? Isn't it U.S. policy to promote a free-market global economy? A: Yes, by and large. Certainly $103 billion if it's all needed is a lot of money. Spread out over three years, however, it would amount to about 0.1 percent of anticipated world economic output. It's worth noting, also, that investors and lenders have already lost large amounts of money in these troubled Asian economies. 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