In a surprise announcement on Thursday, the presidential office said President Park had rejected Prime Minister Chung Hong-won's previous offer to resign and asked him to continue working for the nation with a sense of duty.
Prime Minister Chung had expressed a wish to step down in the wake of the Sewol-ho ferry accident two months ago.
It is the first time in Korea's Constitutional history that a prime minister will be staying on after rendering a resignation.
The presidential press secretary said President Park, who has promised a massive restructuring of the government and a bolstering of the national safety system following April's ferry tragedy, went through great pains before making the latest decision.
"The administrative vacuum and division of public opinion intensified due to the previous nominations. The president has decided the situation can no longer be left alone."
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In regards to the presidential office's personnel verification system, which has been heavily criticized after the recent back-to-back nominee withdrawals, a new senior secretary will be put in charge of finding people to fill positions and verifying their credentials.
Upon Thursday's announcement, the prime minister vowed to pour all his energy into correcting irregularities in Korean society and making the country a safer place to live.
He also said when necessary, he would not hesitate to offer his views to the president on state matters.
The ruling party said the president's decision was understandable and that she had put a priority on minimizing the administrative vacuum and moving forward with the running of state affairs.
The main opposition, on the other hand, criticized the administration for failing to meet the people's expectations to reform Korean society in the aftermath of the ferry disaster.
Choi You-sun, Arirang News.