South Korean government will provide about 50 trillion won (US$38 billion) in new funds to help small companies cope with cash shortages this year, the country's financial watchdog said on Thursday.

"The government will push to supply more than 60 percent out of the planned funds to smaller companies in the first half when a severe downturn is expected," the Financial Services Commission (FSC) said in a statement.

The FSC said it will expand its debt guarantee capacity for state-owned credit guarantee agencies to 25.2 trillion won (US$19.15 billion) this year from 13.5 trillion won (US$10.26 billion) in 2008 in a bid to help reduce risk burdens in lending to smaller firms.

The state-owned Korea Development Bank and Industrial Bank of Korea planed to increase loans to small and medium enterprises by a combined 44 trillion won (US$33.4 billion) this year, the FSC said.

(Xinhua News Agency January 8, 2009)