South Korea on Thursday unveiled a fresh stimulus package including 660 million dollars in special loans for private firms involved in the construction of new highways, roads and bridges.
The finance ministry said the government would shoulder up to 80 percent of loan interest payments in case of any sudden rate rise and provide other incentives to draw idle private funds into social infrastructure construction.
The package includes one trillion won (660 million dollars) in special loans and two trillion won in state-backed credit guarantees for private firms, it said.
The new package is the latest in a series of stimulus measures announced by the government to boost the sagging economy.
The government plans to submit a supplementary budget by the end of next month, with local media reports claiming it could be worth 30 trillion won.
Financial regulators have promised to start injecting a 12 trillion won state-backed fund into banks next month to shore up their capital base and encourage them to expand lending.
Many local firms, especially in construction and shipbuilding are struggling against a shortage of credit.
But local commercial banks are increasingly reluctant to lend to cash-strapped companies as Asia's fourth largest economy teeters on the brink of recession.
The export-dependent economy has been hard hit by the global economic downturn.
The new finance minister Yoon Jeung-Hyun has warned the economy will probably shrink two percent this year, the first annual contraction since 1998.