Thirteen Trillion Won Debt Might Rise From Support For N.K. Light Reactor Project with No Interest

The Board of Audit and Inspection released on July 21st that the South and North Cooperation Fund might owe some 13 trillion and 800.4 billion won worth of debts by the year of 2029 due to the government`s support for the North Korean light water reactor project with no interest rate.

The Board said, “The Fund lends money to the project constructor KEDO with no interest rate, but borrows money from the national trust of Public Fund Management at an annual interest rate of 7 percent, so it is worried that there might be as much a deficit as the gap in interest rates” in its audit result for “Fund Management” conducted in April and May.

Ministry of Unification decided to get some 70 percent (3 trillion and 542 billion won which is some 3.2 billion dollars) of the cost in the form of loans from the Fund, out of the total project cost of 5 trillion and 60 billion won (some 4.6 billion dollars). The Ministry had borrowed 927.1 billion won raised through national bonds issued by the Public Fund Management from 1998 to last year.

In relation to this issue, the Board estimated that the difference amount would reach 13 trillion and 800.4 billion won by 2029 when the principal amount with interest added will be reimbursed, which will be two decades later after the light reactor project is completed in the expected year of 2009.

An official from the Board said, “As of now, there is no other income source for the Fund, so the government will have to come up with other ways to make up for the difference.”

The government once considered a way to place a relevant cost on electric charge fees to compensate for the difference, but it ended with no avail.

The Board also suggested that the Ministry of Planning and Budget should have 24 funds run by government ministries absorbed into the central government budget in the long term after auditing their funds.

The funds that the Board recommended to be abrogated are Information Promotion Fund, International Exchange Fund, Broadcasting Development Fund, Tourism Promotion and Development Fund, Culture and Arts Promotion Fund, People`s Health Promotion Fund, Women`s Development Fund, National Security Fund, Youngster Support Fund and Culture Industry Promotion Fund.

The Board said, “Funds set apart from the central government budget are for less urgent usage, but those 24 funds in question will be better served when they are absorbed into the government budget.

Seung-Ryun Kim srkim@donga.com