North Korean authorities have recently allowed locals to purchase food using foreign currency, Daily NK has learned. This comes amid efforts by North Korean authorities to provide food to the population at lower-than-market prices.

The move suggests the authorities have adopted a strategy to absorb more foreign currency as tough international sanctions and the COVID-19 pandemic amplify the country’s economic troubles.

A source in North Hamgyong Province told Daily NK on Tuesday that the authorities recently issued an order allowing people to use foreign currency when they purchase food at state-run food shops. Accordingly, many people have purchased food in yuan at shops located throughout Hoeryong.

According to the source, the authorities stressed in the order that people could use foreign currency in accordance with “local characteristics.” In short, North Korea’s leadership wants to ensure that people can use the foreign currency in their possession – whether yuan or dollars – to buy needed items. 

In fact, when the authorities provided 10 days of food per family in mid-September to mark the foundation of the country on Sep. 9, they told residents of Hoeryong that “Chinese money can be used [to make the purchases]” and that “it is more advantageous [to use Chinese money] rather than domestic currency [KPW] to buy things.”  

price controls
Tongil Market in Pyongyang / Image: Daily NK

Generally speaking, residents of Pyongyang and other regions far from the Sino-North Korean border use US dollars when making purchases, while residents living in regions along the border – such as North Hamgyong, Yanggang and North Pyongan provinces – use Chinese yuan.

When the food provision was provided earlier this month, state-run food shops in Hoeryong sold a kilogram of rice for 4 yuan, 55 jiao. Using the RMB-KPW exchange rate as of Sep. 12 (RMB 1=KPW 700), this means North Koreans were able to buy food for the equivalent of KPW 3,190.

In fact, purchasing the rice with yuan made it KPW 800 cheaper than using local currency (the rice cost KPW 4,000 per kilogram). The source said many locals consequently tried to purchase food using yuan.

In short, North Koreans in the city believed they could purchase rice on the cheap, while the authorities believed that they could secure foreign currency, even though the state would incur some financial losses. 

North Korean authorities have maintained their strict ban on the use of foreign currency in markets. All in all, the authorities appear to be using several techniques to ensure foreign exchange flows “naturally” into the state’s coffers, the source said. 

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