Korea Sees the IMF's Light

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SEOUL: An austere new budget confirms that South Korea, the Asian contagion's original victim, is on the Road to Wellville. "This is a very good step," says TIME business correspondent Bernard Baumohl. "It's more proof that there's a genuine effort to comply with the International Monetary Fund's requirements." The 1999 budget is only 3.8 percent larger than a year ago -- the smallest increase in 14 years -- and will slash the pay of South Korea's 930,000 public servants by up to 20 percent.

Reforms like that mean unemployment will continue to rise (the budget sets aside a small amount to finance job-training programs and expand unemployment insurance for displaced workers), but Baumohl says the government's belt-tightening has had the desired overall effect: strengthened currency and an influx of foreign capital. "Investors are more confident than ever that South Korea bottomed out six months ago and has turned itself around," he says. "And private investment, not the IMF, is what will ultimately be the country's salvation."