Public Sector Net Debt

Concerns in the Western World are growing over the extent to which North Korea is getting involved in the war in Ukraine and the ramifications that their activities could threaten international stability.

Yesterday, the FCDO issued a joint statement with the Minister of Foreign Affairs for South Korea Cho Tae-yul, condemning North Korea’s involvement with Russia, in Putin’s war against Ukraine.

The statement made it clear that the government “condemn in the strongest terms the Democratic People’s Republic of Korea (DPRK)’s continued unlawful arms transfers and the reported deployment of its troops to the Russian Federation to support Russia’s unlawful war of aggression in Ukraine.”

South Korea believes that as many as 1,500 North Korean special forces personnel have been sent to Russia with 12,000 more potentially on their way. With Russia loosing as many as 1,000 casualties a day, and recruiting some 30,000 a month, Moscow is looking for ways to bolster numbers without calling a special draft – something which could be politically damaging.

Earlier this year, Putin and Kim Jong Un signed a ‘strategic agreement’ in an effort to bring Russia and North Korea closer both geopolitically and militarily.

The pact provided “the provision of mutual assistance in the event of aggression against one of the parties to this agreement and while it was unclear exactly what constitutes ‘assistance’, the recent deployment of troops demonstrates the significance of the pact.

With the North Korea being a pariah of the international financial system and global trade network, Moscow has long supplied Pyongyang with soft and hard commodities either to feed its population or manufacture weapons. However, as the war in Ukraine continues, Russia has looked to North Korea for assistance.

In February of this year for example, South Korea identified that North Korea had sent 6,700 containers of munitions to Russia. Western politicians now worry that the quid-pro-quo could involve the transfer of WMD’s or information thereof.

Accordingly, the FCDO’s statement sounded the alarm on the “possibility for any transfer of nuclear or ballistic missile-related technology to the DPRK, which would jeopardize the international non-proliferation efforts and threaten peace and stability on the Korean Peninsula and across the globe.”

Rachel Reeves is set to announce changes to the government’s fiscal rules, in move which could release up to £50bn for spending on infrastructure, The Guardian understands. The Chancellor is expected to announce these changes an IMF meeting in Washington later today.

It’s understood that the government will use a new method for calculating its balance sheet vis-à-vis spending rules and move away from the existing benchmark (public sector net debt). Under the new method, financial assets and liabilities, like student loans, stakes in private companies and pension schemes will be included. It’s expected that this calculation could allow for more funds to be allocated elsewhere, specifically infrastructure.

Reeves will say that the government will aim to move to a position in which day-to-day spending is covered by tax revenues, while borrowing will only be used to fund capital spending.

Attention now turns to Washington ahead of the budget next Wednesday.