North Korea is preventing people in certain regions from withdrawing money deposited in foreign currency accounts. The measure appears part of the government’s aim to absorb the public’s foreign currency and “normalize” the public financial sector.
A source in North Korea told Daily NK on Thursday that the currency departments of provincial people’s committees decided in early July to prevent people from withdrawing — as cash — foreign currency deposited in foreign currency accounts.
“It was the decision of the provincial-level people’s committees, not an order from Pyongyang,” he said.
North Korea has developed an app that lets users purchase goods from foreign currency shops nationwide with their smartphones.
To pay for goods at the online foreign currency shops, users need a foreign currency account, so even ordinary people are opening such accounts; however, some provincial people’s committees are stopping people from withdrawing money from these same accounts.
The source said North Koreans can deposit foreign currency in banks since they will use it to make card payments in line with the state currency system or as savings.
“But because North Korea legally doesn’t permit individuals to hold foreign currency as cash, [the authorities] won’t let people withdraw cash,” he said.
In principle, North Korea bans individuals from using foreign currency to prevent its own currency from weakening. However, foreign currency has already become a common means of payment in North Korean marketplaces.
Because of this, North Korea’s government has made continued efforts to make foreign currency transactions transpire in the public sector by pulling the public’s foreign currency into the public financial system. The move by the provincial people’s committees to ban foreign currency withdrawals appears to be part of this effort as well.
Though only certain regions are implementing the measure so far, in essence, it was ordered by Pyongyang.
Daily NK’s source said the Secretariat of the Workers’ Party held discussions in June on various ways to develop regional economies, issuing an order for each province and city to create local currency regulations in accordance with local conditions to be ratified by the Cabinet.
Because regional people’s committees are crafting policies based on guidelines from the Central Committee, those policies could differ region-to-region, said the source. However, five localities are implementing bans on cash withdrawals from foreign currency accounts, including Pyongyang and Hyesan.
Ahead of this, North Korea held a meeting of the Secretariat and an expanded meeting of the Secretariat in June.
North Korean news reports on the Secretariat meetings simply said the leadership discussed the strengthening of party regulations and organizational reshuffling. No mention was made of invigorating regional economies.
Meanwhile, North Koreans who know about the ban on withdrawals are depositing only the amount of foreign currency they need for apps and the like.
“The government isn’t forcing people to deposit [foreign currency], it’s just refraining from giving foreign currency in kind to people without official purposes [for using the money],” the source said. “Still, almost nobody is filling their account with foreign currency because they can’t get it back in cash. Most are depositing small amounts they need to buy goods at foreign currency shops.”
However, North Koreans can still withdraw the money deposited in foreign currency accounts in North Korean won. This appears aimed at absorbing the public’s foreign currency and promoting the use of the local currency. It also suggests the government intends to stabilize the economy by preventing its “dollarization” and normalizing the country’s public finance system.
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