Gov't to offer guarantee for banks' foreign loans
- 관리자
- 2008.10.21
- Hit 4189
The government will supply $30 billion quickly to support banks' foreign currency liquidity. To enhance smooth liquidity of the won currency in the market, the Bank of Korea will, meanwhile, purchase bonds on repurchase agreements and national bonds.
To stabilize the stock market, the government will offer three-year income tax deductions to fund investors for a certain portion of their monthly investment funds, and give three-year tax exemptions to investors for income from dividends from other types of funds.
This was decided by Prime Minister Han Seung-soo, Strategy and Finance Minister Kang Man-soo, and ruling Grand National Party Chairman Park Hee-tae at a policy coordination meeting held on Sunday (Oct. 19).
It seems likely that the latest move will make it easier for banks to borrow money from overseas and secure enough domestic currency liquidity as well. The new plan will also allow the foreign exchange market to stabilize quickly, and businesses to have enough liquidity.
The government plans to submit a relevant bill to the National Assembly to guarantee banks' foreign loans through the Korea Development Bank and the Export-Import Bank of Korea, beginning Oct. 20 and offer payment guarantees later on its own after it obtains parliamentary approval.
With borrowing rates also likely to fall, the reverse discrimination currently facing domestic banks when borrowing foreign currency will be removed to some extent.
The government also decided to supply an additional $20 billion to banks and small- and medium-sized exporting firms to support their liquidity, and inject $10 billion into the foreign currency swap market. The government's decision to supply an additional $30 billion to the foreign exchange market will very likely end at an early date the dollar drought confronting banks and enterprises.
When the liquidity difficulties are overcome and anxiety about the financial market is placated, the policy is expected to gradually stabilize the foreign exchange market, with the sharp won-dollar exchange rate fluctuation likely to dwindle.
By Chung Myung-je
Korea.net Chief Staff Writer