The total amount of U.S. dollars circulated and amassed by North Korean people was estimated 500 to 600 million dollars (100 per each household), a South Korean scholar suggested.
Kim Kwang Jin, a senior fellow from Institute for National Security Strategy, argued, “U.S. dollar bills are the most popular currency in North Korea,” at a policy forum held by Korean Sharing Movement on the 15th.
In his article “The Dollarization of North Korean Economy and Dependence on Foreign Currency by the Residents,” Kim analyzed “dollarization of North Korean economy is a result of the disintegration of the official economy and the subsequent spread of foreign currency rather than the government’s foreign currency policy.”
“The North Korean economy, producing only 20 to 30 percent of goods out of the maximum capacity, is difficult to get over with economic downturn and the popularity of foreign currency among residents would increase,” Kim expected.
Kim’s further specification is as follows: “In the China-Korean border region, the Yuan is particularly popular, while in Wonsan (a seaport on the East Sea), the Japanese yen is attractive.”
According to Kim’s article, the North Korean people fully realize impossibility of withdrawing North Korean won from their bank accounts and the depreciation rate is too fast. Kim’s estimate was that “each North Korean household is secretly holding 100 dollars in average.”
“People are considering the unofficial exchange rate every time they buy goods from the private market,” added Kim.
“The North Korean official economy can be divided into the ‘people’s economy,’ which is handled by the government, and the ‘royal economy,’ which is Kim Jung Il’s own. The ‘royal economy’ includes military production and the party economy, which feed one and a half million military-party loyalists. The people’s economy is almost dead and has only been sustained through agricultural production and export,” Kim analyzed.
In another estimate of Kim’s, the “royal economy” holds 217 times more US dollars than the “people’s economy.”
His conclusion: “Foreign aid only cannot transform North Korea. Economic aid and cooperation should aim at increasing the self-sustainability of the North Korean economy.”