The U.S. dollar traded for 16,100 North Korean won in Pyongyang on Sept. 15, down slightly from a record high of 16,500 won on Sept. 2. The regime’s attempts to restrict private currency exchange appear to be backfiring as the won continues to weaken against foreign currencies.
While the Pyongyang won-to-dollar market rate has fallen by about 400 won since the beginning of the month, this also means that the rate has remained above 16,000 won for two weeks.
Similar fluctuations have been seen in exchange rates in other areas. On Sept. 15 the rate of won to dollar in a market in Sinuiju, North Pyongan province, was 16,200 won, or 100 won higher than in Pyongyang.
In the previous survey on Sept. 2, the market rate was 16,700 won. That was the highest rate since the North Korean government introduced currency reform in 2009, according to The Daily NK’s market price data.
North Korea’s won-to-dollar exchange rate had hovered in the 8,000-8,999 won range until the pandemic. But demand for foreign currency fell as the country’s border closures restricted trade, and the exchange rate fell below 5,000 won in late 2021.
North Korean authorities, however, have sent in enforcement forces to crack down on private currency exchange, with the dual goal of confiscating privately held dollars and promoting a transition to state-monitored financial transactions. As a result of this campaign, the exchange rate has soared since June.
Despite the soaring exchange rate, demand for foreign currency has not waned as the authorities push forward with the “20×10 regional development policy,” which requires the import of large quantities of raw materials, parts and machinery. And with the won-dollar exchange rate now more than double its pre-pandemic level, private demand for dollar holdings has risen accordingly.
Yuan exchange rate also increasing
In Pyongyang, Sinuiju and Hyesan, the exchange rate of the North Korean won to the Chinese yuan has also been on the rise, though not as steeply as the dollar.
The Daily NK’s survey showed that one yuan was traded for 1,900 won at a market in Pyongyang on Sept. 15. This is 52% higher than the rate (1,250 won) in The Daily NK’s survey in early January this year.
While exchange rates in North Korean markets have risen significantly since January (the won-to-dollar rate has increased by 94% and the won-to-yuan rate by 52%), the price of goods has been less volatile. The price of North Korean rice is now 30.7% higher than at the beginning of the year, while the price of corn is up 41.6%.
But these prices are similar to those in mid-September last year, when the won-dollar exchange rate was in the range of 8,000 to 8,999 won and the won-yuan exchange rate was in the range of 1,200 to 1,299 won. This suggests that market exchange rates do not directly affect the price of rice and corn in North Korean markets.
Despite the North Korean government’s ban on private money changing, they are unable to prosecute the large-scale money changers who control market exchange rates. These money changers tend to be in league with high-ranking law enforcement officials.
Ultimately, the North Korean government’s efforts to restrict money changing have the unintended effect of driving up exchange rates.
“The money changers at the top are so wealthy that they’re basically untouchable. In fact, law enforcement agencies call them a ‘protected species,’ a source told The Daily NK recently. “When enforcers are sent out, they just catch the small fry, which only drives up the exchange rates.”
The Daily NK works with a network of sources in North Korea, China, and elsewhere. For security reasons, their identities remain anonymous.
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