Hungary’s economy ministry told the Financial Times that North Korean negotiators had tabled the request in November 2008 during a meeting in Pyongyang.

"They asked [us] to take good consideration of the Democratic People’s Republic of Korea’s current economic difficulties and asked for cancellation of over 90% of the total debt amount," the ministry said.

Libido for liability

Czech officials confirmed last week that Pyongyang had offered to settle 5% of its CZK 186 m in accumulated debt in ginseng, an invigorating root used in dietary supplements and teas that are supposed to improve memory, stamina and libido. Communist Czechoslovakia was a leading supplier of heavy machinery, trucks and trams to North Korea, the FT reminded.

However, the now-capitalist Czechs are unconvinced they need an injection of vigour.

"We have been trying to convince them to send, for instance, a shipment of zinc, which is mined there. We would sell it ourselves," Tomas Zidek, Deputy Finance Minister, told local daily MF Dnes.

Bulging debts

"With the domestic economy crumbling, North Korea is also feeling the pinch of tighter international sanctions imposed over its nuclear and missile programmes and the sinking of a South Korean warship," the FT said. The country’s access to global markets is further hindered by outstanding international debts of about USD 12 bn, two-thirds to former communist states.

Following the mysterious sinking of a South Korean warship in March, Washington vowed to further crack down on North Korea’s international financing, money laundering and narcotics operations.

Its Hungarian debt emerged from a trade surplus between the two countries, mostly in the period before the fall of the Iron Curtain, an official said.

The total debt is 29.6 million clearing roubles - an accounting unit used in the former Soviet Bloc.

Hungary said North Korea had agreed in principle to pay the debt in cash, with partial cancellation.

Details such as the clearing-rouble conversion rate and the size of the cancellation must still be settled, however, the paper added.

Officials were unable to say when the negotiations would resume. Ginseng was not mentioned during previous talks."

Source: Porfolio Online Financial Journal