Bank Abandons Exchange Rate Battle

The North Korean banking authorities have abandoned a month-long drive to obtain foreign currency from the citizenry by outbidding private money changers in the marketplace; instead, they have decided to try and extract the same foreign currency in exchange for rice.

A source from Yangkang Province explained the change to Daily NK on the 23rd, saying, “Even as recently as ten days ago, the Foreign Exchange Office was giving a better exchange rate than private money changers, but now that has stopped. Now they are taking foreign currency and selling rice instead, so people are calling it the ‘Rice Exchange Office’.”

On around the 10th of last month, Chosun Trade Bank reportedly began to establish temporary exchange offices at the entrances to permanent markets to try and gather foreign currency by exchanging it for local currency at a marginally better rate than was available from local private money changers.

This practice apparently continued until the 8th of this month. Needless to say, as the competition engendered by the presence of both state and private enterprise gained speed it had the side-effect of making the exchange rate rise considerably.

However, in the end the state was forced to yield to the private money changers. Nevertheless, the effort to obtain foreign currency itself has not ended. Instead, the state has decided to try exchanging it for rice.

According to the source, “You can get 20kg of non-sticky rice for 100 Chinese Yuan.” The price is reportedly fairly close to that of rice in the market (4,400-4,700 North Korean Won/kg) but the quality is marginally better than in the market so the policy is meeting with some success.

At the beginning of this year, the authorities reiterated a ban on the use of foreign currency for domestic transactions and began to actively punish private money changers. However, due to the presence of a close correlation between private money exchange and Chosun Workers’ Party cadres, the crackdown was highly ineffective.

Now even the attempt to take on private money changers at their own game has failed, and the authorities have been forced to adopt a more creative solution.