"North Korea Plans Domestic Bond Issuance for the First Time in 17 Years... Responding to Economic Downturn from COVID-19"

[Image source=AP Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] On the 27th (local time), Thomas Byrne, chairman of the Korea Society, revealed through an article published in the diplomatic media Foreign Policy that North Korea is preparing to issue domestic bonds for the first time in 17 years.

In his article, Byrne claimed that North Korea plans to issue domestic bonds for the first time since 2003 due to a decrease in national revenue caused by the spread of the novel coronavirus disease (COVID-19).

He explained that the scale of this public bond issuance is about 60% of North Korea's budget and aims to recover as much foreign currency circulating in the market as possible. Byrne stated that while most of the bonds issued by North Korea are expected to be taken on by state-owned enterprises, the emerging merchant class known as 'donju,' who cannot operate businesses without government approval, will be effectively forced to purchase 40% of the public bonds.

Byrne noted that this bond issuance is unusual given that Kim Jong-un, Chairman of the State Affairs Commission of North Korea, and his father Kim Jong-il, former Chairman of the National Defense Commission, have managed austere finances appropriate to their circumstances and avoided policies that would fuel inflation. Although North Korea has faced various economic difficulties and failures, unlike other isolated countries such as Zimbabwe or Venezuela, it has not fallen into uncontrollable hyperinflation reaching several hundred percent, Byrne added.

North Korea has been cornered into taking such measures because, due to international sanctions, it cannot expect assistance from international financial institutions such as the International Monetary Fund (IMF) and the World Bank (WB), and since January, trade with its largest trading partner, China, has also been suspended.

North Korea has never issued public bonds since issuing three types of 10-year maturity 'People's Life Bonds' in 2003, denominated in 500 won, 1000 won, and 5000 won. At that time, the bonds issued by North Korea were operated in a format where the principal and prize money were returned through a lottery. North Korea has never issued foreign bonds.

After the collapse of the Soviet Union in 1991, North Korea experienced an economic recession and eventually approached the IMF in 1997. At that time, after conducting a due diligence, the IMF stated that 'fundamental changes in economic policy are necessary,' and discussions were halted. Byrne explained, "The same obstacles that blocked progress in 1997 are still widespread in North Korea today, and institutionally, nothing has changed except that additional international sanctions have been imposed over the past 20 years."

This content was produced with the assistance of AI translation services.