The mysterious surge of North Korea’s currency
“A currency normally depreciates when a country is facing troubles, but the opposite is happening in North Korea,” said Kim Byung-yeon, a professor of economics at Seoul National University. The North may be trying to boost the won to support the economy, but continuing such attempts “could end up harming the real economy even more.”
North Korea’s unofficial exchange rate, which is tracked by the two news outlets, is formed in the country’s “jangmadang,” local markets that have grown to become a large informal economy. Its official rate has been steady at around 100 won per dollar for the past decade, an artificially strong level with no use as an indicator. The unofficial rate is around 5,200 won per dollar.
Running a private currency exchange is illegal in North Korea, so the two media companies, Asia Press International of Japan and Seoul-based Daily NK, use secret human networks inside the isolated country to compile their rates, according to Jiro Ishimaru, a journalist at Asia Press International, and Lee Sang Yong, editor-in-chief of Daily NK. They get information on trading of the currencies at the jangmadang.
According to Daily NK, the rate was generally steady at about 8,000 won per dollar since early 2013, but the won started gaining last year, reaching a monthly average of 4,723 in August, the strongest since June 2012.
Imports from China, North Korea’s biggest trading partner, dropped more than 90 per cent year on year every month from August 2020 to February this year, with declines continuing thereafter, according to the Korea International Trade Association, a trade group in Seoul. Satellite images show how once-busy bridges and roads between North Korea and China became empty after the border closure, according to Ramon Pacheco Pardo, a professor of international relations at King’s College London.
The slump in imports isn’t the only reason for the surge, according to Seoul National University’s Kim. The won’s gains imply that foreign currencies have lost their allure within North Korea, too, and that suggests some kind of government crackdown on their use, he said.
“Even though imports dropped, the won wouldn’t have strengthened so much if the dollar remained in demand in the local markets,” Kim said.
Many retail outlets in the capital Pyongyang have stopped accepting dollars or prepaid overseas currency cards from foreigners in the country, and are instead asking them to pay in won, the Russian embassy said in a Facebook post in October last year.
Financial authorities were ordering residents to report their holdings of foreign currencies and deposit them in banks, Daily NK reported this April, citing an unidentified person in North Korea familiar with the matter.
