The presidential office said the government would help about 290,000 credit delinquents pay back their debts by allowing them to retrieve their deposits in the national pension fund ahead of schedule.

It will also help other credit delinquents through consultations among state agencies, the office said.

The total number of such delinquents stood at 1.42 million at the end of last year.

The bailout is part of a 'New Start 2008 Project' to help ease the economic hardships of the disadvantaged, said presidential spokesman Lee Dong Kwan.

'The New Start 2008 Project is aimed at helping those who have failed to gain an opportunity to rehabilitate themselves after dropping out of competition due to rapid social changes,' he said.

The project calls for extending about one trillion won (S$1.40 billion ) in special payment guarantees to about 125,000 self-employed people and small business owners - up to 10 million won each.

The government also plans to provide low-interest loans to indebted farmers and higher insurance coverage for part-time workers.

Previous administrations used state funds to bail out insolvent financial institutions and firms after the country was hit by the 1997 financial crisis.

In 2004 some one million credit delinquents were bailed out following a year-long credit card crisis which prompted banks to clamp down on overdue card bills.

But credit problems have grown again, mainly due to a sharp increase in the size of mortgage loans as property prices soared. -- AFP