Seoul has demanded that Pyongyang pay back its loans and interest totaling $86 million in installments, with the first repayment of the principal and interest due next Monday, according to the Unification Ministry.
“As the due date fast approaches, we have sent a notice to the North through the Export-Import Bank of Korea regarding its repayment obligation, about a month before the date and in line with international practices,” said a ministry official, declining to be named.
Under the Roh Moo-hyun administration, the Seoul government provided some $80 million worth of raw materials needed for the destitute state to manufacture garments, shoes and soaps.
Under a bilateral agreement, the North is to repay its “light industry loans” in 10 years with a five-year grace period. Pyongyang, at the time, promised to make the repayments with mineral resources and development rights. In 2008, the North repaid 3 percent of the loans in the form of zinc worth $2.4 million.
Over the next 10 years, the North is to pay back a total of $86.03 million -- the principal worth $77.6 million plus interest amounting to $8.43 million. The interest rate is a generous 1 percent.
But given its poor economic conditions aggravated by deepening international isolation, Pyongyang might not be able to pay back its loans, analysts said. The North is said to have remained mum about Seoul’s notice about the due date.
Seoul’s call for the repayments comes as Pyongyang is asking for a 10-percent pay increase for its workers at the joint industrial complex in the North’s border city of Gaeseong.
Pyongyang has already ignored Seoul’s repeated calls for paying back food loans. For these loans, the North was to pay $5.83 million for the first installment in July 2012 and $5.78 million for the second installment last July.
From 2000-2007, the South extended loans of rice and corn worth $720 million to the North. Pyongyang had agreed to repay the loans in 20 years with a 10-year grace period. The interest rate was 1 percent.
Under the agreements for the food and light industry loans, the North is to pay back a total of $961.53 million to the South by 2037.
By Song Sang-ho (firstname.lastname@example.org)