SEOUL, South Korea — South Korea's Cabinet on Thursday approved a draft 1988 budget which, defying strong U.S. pressure, envisages only a modest appreciation next year of its won currency against the dollar.
"The won will have to remain stable next year to ensure there is no serious negative impact on the South Korean economy of the recent labor disputes," an official of the state Economic Planning Board told reporters.
The budget, which goes before Parliament next week, calls for a mere 3.8% revaluation of the won against the dollar for 1988. The annual average rate is envisaged at 790 won to the dollar in 1988, compared to 820 won this year.
Last week, U.S. Treasury Secretary James A. Baker III sent a letter to South Korean Finance Minister Sakong Il urging the Seoul government to accelerate revaluation of the won against the dollar to help reduce Washington's trade deficit with South Korea, government officials said.
They said the letter expressed strong disappointment with the appreciation conceded so far by Seoul, particularly in the past two months.
The South Korean currency rose 6.49% to 808.90 won to the dollar at the end of June from 861.40 at the beginning of this year but has since remained little changed. The won was quoted at 806.20 on Thursday.
"The won is expected to stand at around 800 to the dollar at the end of this year, and next year's annual average rate of 790 means the rate would be between 780 and 770 at end-1988," the planning board official said.
U.S. officials said earlier this year that Congress was likely to pass various protectionist trade bills unless the Asian and Pacific nations appreciated their currencies to reduce trade imbalances. Last year, South Korea recorded a $7.4-billion trade surplus with the United States.
In the first six months of this year, Seoul quickened the pace of the won's revaluation, cut import taxes on more than 150 items for which the United States had asked South Korea to lower tariffs, removed import curbs on 170 products and announced a list of $2.6 billion worth of American goods it would buy this year to help reduce the imbalance.