The North Korean authorities have ordered residents of Pyongyang to convert hard currency holdings in US Dollars and Chinese Renminbi to North Korean Won, a source from the North Korean capital has informed Daily NK. The order was accompanied by the threat of forcible expropriation if the process is not complete within a month.
However, the source reported little expectation that the policy will continue for long, much less that it has a chance of succeeding.
The Pyongyang source told Daily NK on the 17th, “This order came down telling people to change their foreign currency to domestic money. It said there should be no confusion over foreign currency policy.”
“It emphasized that there is a grace period of one month in place, and therefore people should go to currency exchange locations and get it changed,” the source went on. “They intimidated people by saying they know all the ways people keep their hard currency ownership hidden and threatening serious punishment for anyone who defies state policy. There has been more fear around since the execution of the aunt’s husband [Jang Song Taek], and some people with dollars do seem to be changing them.”
“However, rather than going to the temporary exchange locations they've set up, the majority of people say they will go to private currency traders and change their money there,” the source went on. “The volume of dollars circulating has gone up because of this sudden measure, and so the exchange rate has taken a hit. $1 was at 8400 won in mid December, but it has dropped to 7800 won now.”
North Korean civilians have long been wary of domestic North Korean currency due to the politicized nature of economic policy in the country; however, all remaining trust collapsed completely after a lightning currency reform implemented in November 2009. This helped exacerbate an existing trend toward possession of foreign currency.
Since then, the authorities have tried a number of ways of increasing the value of local currency, including coercive measures such as compulsory exchange commands. However, they have failed to arrest the trend toward hard currency ownership and declining North Korean Won values.
“The Upper [the authorities] have tried a number of things to try and secure hard currency,” the source recalled. “For instance, in 2012 they said they'd buy foreign currency at a higher rate than in the market. But these plans all failed. When this tension dissipates confusion could come, as exchange rates take a jump off the back of people moving to try and get hold of foreign currency again.”
“This kind of currency control policy simply cannot continue for long given that foreign currency is in use in places like the increasingly popular burger joint, the big store on Gwangbok St. and other nice restaurants,” the source said. “Moreover, the harsher the controls or crackdowns get, the greater the chance of a backlash. So, this policy will probably fizzle out in no time.”