§ Mr. RendelTo ask the Chancellor of the Exchequer what discussions he has had with ministerial colleagues regarding the financial crisis in Asia; and if he will make a statement. [23871]
§ Mrs. Liddell[holding answer 28 January 1998]: The financial turbulence in Asia was discussed at length by European Finance Ministers at the ECOFIN meeting on 19 January, which the Chancellor chaired. HM Treasury, the Foreign and Commonwealth Office and the Bank of England continue to monitor developments in the region very closely.
Finance Ministers and Central Bank Governors of the potential participants in the supplemental finance assistance package for Korea—the UK, Australia, Belgium, Canada, France, Germany, Italy, Japan, New Zealand, the Netherlands, Sweden, Switzerland, and the United States—issued a statement on 24 December 1997, welcoming the Korean authorities' announcement of additional measures to strengthen macroeconomic policy and accelerate structural reforms, and the disbursement of US$5 billion by the World Bank and the Asian Development Bank.
The potential participants stated that they would be prepared to support action to advance by early January existing commitments of official finance, including the acceleration of IMF disbursements, and the disbursement of a substantial portion (US$8 billion) of the supplemental financial commitments made bilaterally—in the context of a significant voluntary extension of the maturities of existing claims by international banks on Korean financial institutions. The UK's share of this US$8 billion would be US$440 million.
Following discussions between the major commercial banks involved, the IMF and the Korean authorities, I understand major commercial banks are generally rolling over their short term lending to Korea. Discussions are under way on a medium term agreement providing for a significant extension of the maturity of this debt. Bilateral official finance, including the UK's facility, has not yet been disbursed.
The IMF also released a statement on 24 December, which welcomed Korea's intensification and acceleration of its macroeconomic policy adjustments and structural reforms, and indicated the IMF's intention to accelerate the resources available to Korea under the existing stand-by credit.
Since these statements were made, the IMF disbursed US$2 billion on 30 December 1997, and a further US$2 billion on 7 January 1998. This brings the total IMF disbursement to US$13.1 billion.
The financial turbulence in Asia is of global concern and requires a global response. As an open economy, the UK is deeply interested in economic prosperity in Asia.
312WThe UK has worked closely with other G7 colleagues, especially Japan, and will work with the IMF and the World Bank to help resolve the current crisis.
Her Majesty's Government are confident in Asia's long-term economic prospects. The factors which have led to the tremendous growth in the region are still there. Now what is needed is a strong commitment from countries throughout the region to necessary policy reforms in conjunction with IMF and World Bank, to restore confidence.