What explains the recent rise in the cost of goods in North Korea?

Kang Mi Jin  |  2017-09-19 15:07
Read in Korean  
After North Korea conducted its sixth ever nuclear weapons test on September 3, gasoline prices jumped. Prices for daily necessities and grains followed suit shortly. Until recently, prices for such goods in North Korea remained relatively stable despite consecutive rounds of strong international sanctions targeting the North. But now the international communitys actions have started to have an effect, stoking anxiety among the residents about the potential for ever climbing prices.    

This upsurge in prices began to occur before the United Nations unanimously passed its latest round of sanctions. Security Council Resolution 2375 - which passed on September 11 - contains some of the strictest provisions yet, including a ban on importing North Korean textiles and a restriction of exports to North Korea to just 30% of current levels. However, since the cost of goods increased prior to the UNs adoption of 2375, analysts are wondering what lies behind the jump.  

According to inside sources, the cost of one kilogram of rice was about KPW 5,800 at the end of last month in Pyongyang, South Pyongan Province Sinuiju City, and Ryanggang Province Hyesan City. On September 5th, the prices passed the KPW 6,000 mark and have continued to slowly rise. After the Norths nuclear test, gasoline prices rose sharply around the country. Rice and other grains followed suit in due course.   

Insiders located in the border regions near China - which have long served as hubs of trade and smuggling - are also sensing the climbing prices. A source from Ryanggang Province explained to Daily NK on September 11, "When we heard about economic sanctions in the past, there were merely slight increases in the cost of rice, but now we are seeing a different kind of effect. 
 
She continued, Even though we are currently at the height of the corn harvest season, corn is nonetheless selling for KPW 2,700 per kilogram, [it sold for just KPW 1,900 per kg at the end of August]. Merchants havent been overly concerned until now, but now that we see corn prices increasing during the harvest season, it seems clear that the economic situation will continue to deteriorate.  

Witnessing the cost of diesel and gasoline spike upwards, some merchants have predicted that this will cause the price of other products to raise as well, and have therefore responded by reducing the number of products available for sale. By doing so, they hope to be able to sell at a higher price later. This reduced supply, in turn, has itself pushed prices up. 

Also, as reports and rumors from the outside world penetrate further into North Korea, more and more people are coming to realize that North Koreas closest friends, especially China, are meaningfully participating in the sanctions. This information also helps to push prices up.   

A poor yield of corn this year is also playing a role. Severe droughts in the spring have hurt bottom line harvests of grains such as corn. 

North Korean traders are doing their utmost to maintain contact with the outside world so they can ascertain information about how the international situation will affect their livelihood. The source explained, Residents who trade with Chinese merchants are trembling with fear because they are worried that the goods they deal in will become restricted or the prices will rise. 

The residents are especially concerned because prices are rising for both food products and other daily necessities. 

In a telephone call with Daily NK on September 10, a source from Kangwon Province said, Spring water was selling for KPW 500-600, but its risen by about KPW 500. At this time of year, a portion of tofu on the expensive end would sell for KPW 1,100, but now its going for KPW 1,300.  

It is also possible that the gasoline price rise is partially due to an effort by the authorities to restrict supply in order to ration. Kim Jong Un, sensing an impending reduction in trade and gasoline supply, might have begun to store up food and oil in military and private warehouses--behavior that would certainly block up market-based distribution networks.
 
Advertisements, links with an http address and inappropriate language will be deleted.

2017.09.27
Won Pyongyang Sinuiju Hyesan
Exchange Rate 8,100 8,125 8,240
Rice Price 6,100 6,085 6,100