In the News – Export-Import Bank Urges N.Korea to Repay Debt

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In the News – Export-Import Bank Urges N.Korea to Repay Debt

The Export-Import Bank of Korea has once again urged North Korea to repay overdue loans.

“It is regrettable that no steps are being taken despite the fact that the principal on food loans continues to be in arrears,” the bank said on Monday. “We urged the speedy repayment of the overdue loans.”

South Korea loaned US$720 million to North Korea in the form of 2.4 million tons of rice and 200,000 tons of corn as part of food aid starting in 2000. June 7 was the repayment deadline for $5.83 million since the North agreed to start paying back the principal in 2012.

The bank notified North Korea of the repayment date in early May, one month before the deadline, but there was no response.

 

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In the News – N. Korea’s silence on debt gives S. Korea right to declare Pyongyang’s default

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In the News – N. Korea’s silence on debt gives S. Korea right to declare Pyongyang’s default

North Korea missed the deadline Sunday for notifying South Korea of how it will repay millions of dollars in loans provided in the form of food in 2000, resulting in Seoul having the right to declare Pyongyang has defaulted on its debt, an official said.

South Korea sent the North a message on June 15 that the communist nation was supposed to have paid back US$5.83 million in the first installment of a 2000 food loan worth $88.36 million by June 7. The North was required to respond to the message in 30 days.

That deadline passed on Sunday with the North remaining silent, giving South Korea the right to declare the North has defaulted on the debt, according to a government official in Seoul.

But South Korea is unlikely to go ahead with the declaration any time soon as it would have little effect on the North. The communist nation remains largely outside of the international financial system and the prospect of national default is unlikely to force it to repay its debt.

Officials said they are considering sending Pyongyang a message again calling for debt repayment.

Widespread views are that it won’t be easy for the North, which is still struggling with food shortages, to pay back its debt, but officials said the country could repay the debt in kind as it did before. In 2007 and 2008, the North repaid some debt with $2.4 million worth of zinc ores.

After the two Koreas held their first-ever summit in 2000, South Korea provided the North with a total of US$720 million in loans of rice and corn until 2007. Including interest accrued on the loans, the North is required to repay some US$875 million by 2037.

Such aid has been cut off after the South’s President Lee Myung-bak took office with a pledge to link any assistance to the North to progress in international efforts to end Pyongyang’s nuclear weapons programs.

 

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