January 19, 2012 09:42
North Korea is struggling to free itself from a mountain of debt the economic basket case incurred mainly from friendly communist countries during the Cold War. Seoul estimates North Korea's external debt at about US$20 billion as of this year, borrowed chiefly from the Soviet Union and East European countries before the fall of the Berlin Wall in 1989.
Since its economy deteriorated in the 1990s, the North has failed to repay the principal and interest on the loans from almost all creditor countries. It has borrowed huge amounts of money from European banks but has not paid off most of the debt, and some of the banks have put the North on a blacklist and even refuse to receive fresh savings deposits from the regime.
Russia has reportedly written off some of about $8 billion of North Korean debt for the sake of better bilateral relations. Since the 2000s, Pyongyang has held negotiations with its creditor nations on repaying its debts by installments over 30 years. It seems that Russia wrote off part of the North's debt in exchange for participation in natural resources development in the North.
With the economy worsening further, the North asked Hungary to write off more than 90 percent of its outstanding debt when the financial crisis hit in 2008, the Financial Times reported. But Hungary reportedly wrote off only part of the debt.
The North also asked the Czech Republic to write off 95 percent of some $10 million in debts. It offered to pay the rest or about $500,000 in ginseng.
The regime is also seeking ways to pay off its debts in munitions materials if negotiations do not work out. Pyongyang has reportedly discussed with Iran ways to pay off debts amounting to hundreds of millions of dollars in small submarines.
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