North Korea

IMF and other global banks are ready to work with North Korea, if it works with them

The International Monetary Fund would ‘seek to be helpful’, though it doesn’t appear the North has approached it

PUBLISHED : Friday, 13 July, 2018, 5:53am
UPDATED : Friday, 13 July, 2018, 10:42pm

As North Korea’s leader Kim Jong-un develops relationships with other nations through summit diplomacy, global financial institutions have shown a willingness to help him grow North Korea’s economy.

The International Monetary Fund, with a lending capacity of nearly US$700 billion for its current 189 member countries, would “seek to be helpful” should North Korea want to join the institution, an IMF official told the South China Morning Post this week.

“We hope that the ongoing diplomacy related to North Korea paves the way to resolving geopolitical tensions in a peaceful and permanent manner,” the official, who spoke on condition of anonymity, said.

“We will monitor developments closely and, as always, the IMF will seek to be helpful as appropriate.”

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The World Bank, Asia Development Bank and European Bank for Reconstruction and Development could also provide loans and assistance to Pyongyang.

When relations between Kim and South Korea, and then the United States, seemed to thaw, those three banks notified South Korean Deputy Prime Minister Kim Dong-yeon last month of their willingness to participate in North Korea’s economic development, according to a report in the Korea Times.

It is believed that Pyongyang has not sought any formal proposal of membership in the IMF or World Bank, which are both based in Washington.

Kim In-ryong, North Korea’s deputy ambassador to the United Nations, did not respond to an emailed request for comment.

But a precondition for any country to join the World Bank is first becoming a member in the IMF and meeting all its standards. And North Korea has not shown an inclination to share the economic data that the IMF would require for membership.

Even before that, the IMF has long maintained that North Korea needs to establish a “normalisation of relations” with the international community before seeking membership.

Currently, Pyongyang has no formal ties with either the United States or Japan – the top two voting powers in the IMF and the World Bank – whose endorsements North Korea must have to join the institutions.

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In an agreement reached during their summit meeting in Singapore in June, Kim Jong-un and US President Donald Trump committed to “establish new US-DPRK relations”. DPRK is short for North Korea’s formal name, the Democratic People’s Republic of Korea.

During their meeting, Trump even presented a brief video promoting a prosperous, more robust economic future for North Korea, were it to give up its nuclear arsenal.

North Korea also made similar commitments with Japan to “start bilateral talks aimed at taking steps to normalise their relations”, according to a joint statement of six-party talks struck together with the US, South Korea, Russia and China in 2007.

As North Korea’s only major trading partner and the IMF’s No. 3 voting power, China could be Pyongyang’s biggest ally in any IMF membership application effort. China’s representative office in the IMF declined to comment.

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If North Korea is truly serious about economic reform and development, it should join the IMF and World Bank as soon as possible, David Dollar, a senior fellow in the John L. Thornton China Centre at the Brookings Institution, said. 

Dollar said that the institutions could start helping North Korea with technical assistance and training “even before they are members”.

That assistance, he said, could include studies of the macroeconomy and different sectors, assistance in compiling relevant economic data, and training for government officials in ministries dealing with trade, finance, and infrastructure.

According to IMF membership obligations, Pyongyang must disclose its financial, fiscal and economic statistics. It would also need to refrain from restrictions on foreign currency exchange.

A key challenge for North Korea that the IMF would work with it to improve, Dollar added, is developing a well-functioning foreign exchange market with a unified exchange rate, consistent monetary policy and freedom for current account transactions.