S. Korea Crisis Continues Ripple Effect

The International Monetary Fund, its resources strained by the Asian financial crisis, is asking member countries to boost its capital base by $160 billion--almost double the amount they agreed upon in September.

The request, outlined in an internal memo by IMF Managing Director Michel Camdessus, comes amid rumors that South Korea will require even more than the $21 billion the fund has promised under a $60-billion international rescue plan.

Camdessus’ bid is likely to receive a lukewarm reception from the United States, where the Clinton administration is already facing heavy opposition in Congress to expanding U.S. participation in such rescue plans.

A month ago, lawmakers adjourned for the year without approving the U.S. share of the fund’s original request for an additional $90 billion from all its member countries.

The administration had joined other governments in September in approving the $90-billion, or 45%, increase in the IMF’s lending resources, but that total was settled on efore the Asian turmoil hit full force.

Camdessus’ request would ask the United States and other IMF members essentially to double that increase, raising it to $160 billion, for a boost of almost 80%.

However, officials said the move would be designed primarily to reassure markets that the IMF would have sufficient resources for future rescue packages, rather than to finance any additional loans to South Korea.

Both the increase in IMF resources that was agreed to in September and the extra $70 billion Camdessus is seeking now would have to be ratified by parliaments and are unlikely to take effect for several years.

International officials said Camdessus planned to present his request Wednesday to the executive board, which is made up of representatives of both large and small countries.

There was no immediate indication whether the United States and other major donor countries would go along with Camdessus’ request for additional funding. The Treasury Department declined to comment on the request, and key members of Congress, in the middle of their year-end recess, were unavailable to reporters.

The managing director’s memo marked the first official admission by the 181-country IMF that it is beginning to worry about the size of its lending pool as a result of the Asian crisis.

Only last week, Stanley Fischer, the IMF’s deputy managing director, asserted that even with the loans to Asian countries the IMF “should be comfortable” with its current cash pool and “equipped to deal with any foreseeable crisis.”

The IMF has been the principal lender to financially troubled countries such as South Korea, Indonesia and Thailand, whose economies have been hit hard in the Asian financial shake-up, providing $35 billion to those three nations alone.

The organization now has a capital base of $210 billion, but much of that already has been lent out to other countries, including Russia and the Philippines.

Analysts say the loan package for South Korea has demonstrated that IMF lending packages for Asia will have to be much larger than traditional bailout plans because of the need to stabilize global financial markets.

Besides the $21 billion for South Korea, the fund also has approved loans of $10 billion to Indonesia and $4 billion to Thailand. Such credits are disbursed gradually, however, over a period of several years.

A separate supplemental fund, known as the New Arrangements to Borrow, set up to provide $50 billion more for emergency loans to financially strapped countries, has been delayed pending U.S. ratification.

Monies for the $3.5-billion U.S. contribution to the NAB were included in a bill that was held up in Congress last month over the abortion issue.

Congressional conservatives blocked both the IMF funds and $926 million for the United Nations because Clinton refused to meet their demand to bar U.S. aid to international family planning groups that use their own funds to promote or perform abortions. The president has said he plans to renew his request to lawmakers in January.

Asia’s crisis will be the subject of German Finance Minister Theo Waigel’s meetings in Washington next week with Treasury Secretary Robert E. Rubin and Camdessus. “The situation on the international financial markets will stand at the center of the political talks, especially in Asia following the IMF programs with [South] Korea, Indonesia and Thailand,” said a statement released in Bonn.