For the first time in 17 years, North Korean authorities may be planning to issue public bonds to alleviate the shortage of foreign currency in the country, Daily NK has learned.
High-level government officials recently gathered to discuss the issuance of bonds, according to Daily NK sources on Apr. 8.
Daily NK sources reported that a move to issue public bonds stems from the country’s lack of money to finance major national projects, such as the building of the Pyongyang General Hospital.
ABSORBING FOREIGN CURRENCY
The last time North Korea floated bonds was in 2003 following the implementation of the July 1 Measures. The country’s flotation of bonds at the time achieved some success in securing funds for the regime and was largely aimed at individuals.
The planned issuance of bonds this time around is largely aimed at collecting as much foreign currency circulating in the country as possible.
“Bonds will be issued to organizations that require funds and they will use the bonds to pay for things they need,” a source told Daily NK.
For example, if Construction Bureau 8, which is leading the construction of the Pyongyang General Hospital, requests approval to the Cabinet’s Planning Committee for the use of state funds to purchase cement, the organization can take a government-issued document to the Central Bank of the Democratic People’s Republic of Korea to receive a public bond receipt.
The bureau can then take that receipt to a cement factory and use it to pay for production costs. The bonds are essentially a way for organizations short on cash to pay for things they need instead of using cash.
According to Daily NK sources, 60% of the public bonds issued will be given to organizations in need of funds, while the remaining 40% will be purchased in foreign currency by donju running private businesses.
Ultimately, what this could mean is that North Korea’s financial authorities will only issue business permits to the donju if they purchase public bonds. Donju who buy up mass amounts of bonds or purchase materials needed for their businesses using dollars may also be given special commendations by the government for their “loyalty.”
If the bonds are issued, they are expected to make up at least 60% of the country’s overall budget.
Donju, however, may not go along with the government’s plan because of uncertainty surrounding whether the government will be able to pay back their original investment on the bonds.
Daily NK sources speculated that small-scale businesses will suffer the most from the government’s plan to issue bonds.
“Business people are worried that issuing public bonds could worsen the already difficult financial circumstances manufacturers are in, and could even disrupt consumption and distribution in the country,” one source said.
High-level government officials aware of the plans to issue public bonds are reportedly gathering up as much dollars they can through “currency brokers” due to worries that the dollar currency rate could spike if public bonds are made official at the Supreme People’s Assembly meeting on Apr. 10.
North Korea announced that it was issuing public bonds in 2003, but this may not be the case this time around. Daily NK sources suggested that because the public bonds are only for businesses and the wealthy with large amounts of foreign currency, this might mean that the regime could refrain from publicly announcing it at meeting.
*Translated by Jason Bartlett
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