Over two months have passed since North Korean authorities issued money vouchers, or donpyo, to absorb foreign exchange. However, most North Koreans remain unaware that the coupons were issued.
According to multiple Daily NK sources, only certain cadres, money changers with lots of foreign exchange, and donju (wealthy individuals with lots of cash or property) know of the donpyo. Even many donju have never seen one in real life.
The authorities have yet to issue any official statements, measures or informational documents confirming the existence of the donpyo, so rumors surrounding the coupons are rife even in North Korea.
Because of this, Daily NK has conducted an in-depth interview with a source in North Korea familiar with the issuance of the donpyo to verify why the authorities issued the coupons and which pertinent measures they have taken.
The following is a Q&A with Mr. A, a cadre engaged in finance-related duties.
DNK: Have the authorities issued any official statements or documents related to the donpyo since their release?
Mr. A: No. So far, they’ve just been making people who use actual foreign currency change their money and telling them that “the donpyo is as good as cash.” They’re only trying to convince people who are about to buy something with foreign currency that the donpyo are worth the same as cash. When they issued donpyo in the past, they put up signs at banks, state-designated moneychangers, foreign exchange shops and elsewhere telling people how to use them. In fact, the authorities usually provide information upon the implementation of new policies but, so far, there have been no documents related to the donpyo published.
DNK: If the state issued the donpyo simply to absorb foreign currency, was it really necessary to issue a new currency?
Mr. A: The people with foreign currency are either cadres or donju. The authorities have already tried several times to get these people to invest. But who’s going to voluntarily give their money to the state nowadays? They won’t give up their foreign currency, even if the state offers inducements. However, the authorities judged that if they substituted donpyo for foreign exchange when people are about to use the latter, the donpyo would circulate in shops and markets while the foreign currency would go to the state. It’s a sort of “campaign” to take privately-held “idle money” and use it to fund the state economy.
DNK: Doesn’t a “campaign” suggest a temporary measure? Does this mean nothing has been legally stipulated regarding the donpyo in North Korea?
Mr. A: That’s the case so far. The State Planning Commission and Central Bank have essentially implemented a temporary measure to suck foreign currency into state coffers. The (Supreme People’s Assembly’s) Standing Committee has passed no law regarding it. The vouchers are simply aimed at temporarily pulling in the cash the state needs to attain maximum results during the four remaining years of the five-year economic development plan; the authorities won’t continue using the donpyo in the future. You can think of it as a temporary, special measure.
DNK: Some people say North Korea issued the donpyo because the country ran out of paper and ink to print currency.
Mr. A: That’s not why. This is a country that fires off nuclear-armed missiles no matter how little money it has. Do you think it can’t print money just because it has no toner? You can save a bit of cash when you print money if donpyo circulate well, and you can print fewer KPW 5,000 bills by substituting donpyo worth KPW 5,000 for them. But that’s not the main reason they were issued. The main reason was not to save money on printing cash, but to suck foreign currency into state pockets and raise the value of local currency by reducing its circulation.
DNK: To pull in idle cash from donju, it seems you would have to issue donpyo in higher denominations, so why issue most of them in denominations of KPW 5,000?
Mr. A: Firstly, KPW 5,000 is the local currency’s highest denomination. They thought if you print higher denominations, it could cause confusion. More importantly, the authorities didn’t want to make it seem like they printed the donpyo so the state could suck in foreign currency. They think it’s important to make people believe that the coupons are just something you use when you spend foreign currency. This is why they are first using them in shops, and printed them in familiar denominations.
DNK: The exchange rate has recently been holding at KPW 5,000 to the dollar, so weren’t the donpyo issued in denominations of KPW 5,000 to make it easy to change foreign currency for them?
Mr. A: Ultimately, that’s partly correct, but not completely so. Frankly, they didn’t set out from the very beginning to print KPW 5,000 donpyo synched to KPW 5,000 to the dollar. The state can’t arbitrarily control the exchange rate. The exchange rate might not remain at KPW 5,000 to the dollar, and the state cannot make it stay there.
DNK: Can we say that so far, the use of the donpyo has had no effect on the exchange rate?
Mr. A: That’s right. The circulation of donpyo is very small, not enough to impact the exchange rate. The leadership plans to print more vouchers after seeing the public response and the quarterly numbers. Right now, they are watching trends surrounding the donpyo. They plan to craft a plan of operations based on the quarterly numbers by the end of the year, so I think there will be a decision early next year to either use the coupons in earnest or quietly make them disappear.
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