IMF chief welcomes S.Korea bank rescue package

WASHINGTON (Reuters) - International Monetary Fund chief, Dominique Strauss-Kahn, on Sunday welcomed steps by South Korea to join international rescue efforts to shore up banks and markets in the face of a spreading credit crisis.

"The announced guarantee of banks' external liabilities will bring Korea's policies closer in line with advanced countries, including some in the region, and help ease pressures in the local dollar funding market," said Strauss-Kahn, IMF managing director, in a statement.

South Korea on Sunday pledged more than $130 billion to resuscitate its markets dragged down by the global crisis, offering a state guarantee on foreign debt and promising to recapitalize financial firms.

Banks in Asia's fourth-largest economy have struggled to find the dollars they need to pay their debt, while frightened investors have pummeled the won currency to its lowest in over a decade.

"While global financial conditions will likely remain unsettled for some time, the government's policy package should support confidence in the Korean financial system and return attention to Korea's solid macroeconomic fundamentals, including its sizable foreign reserves," Strauss-Kahn added.

(Reporting by Lesley Wroughton; Editing by Bernard Orr)