An inside source reports that popular dependence on foreign currencies for trading continues in spite of last year’s currency redenomination, to the extent that market traders are openly setting separate prices in U.S. dollars or Yuan alongside the depreciating North Korean won.
The inside source from Pyongyang explained to The Daily NK on September 5th, “In recent market trading, usage of dollars has increased rapidly, and now market prices are being set according to a dollar standard. Even when money is loaned and repaid, the amount for repayment is decided based on the dollar standard.”
As of September 2nd, the exchange rate in Pyongyang was around 150,000 won to $100, as North Korean people refer to it. Loans made in North Korean won are always calculated according to the value of the dollar, and the value of the loan fluctuates accordingly.
The source added, “Recently, market merchants have been setting separate Yuan or dollar prices, except for on rice, corn, and ingredients for side-dishes. The fabric stalls in Sunkyo market in Pyongyang put up all their prices in dollars.”
“Especially in the case of wholesalers,” he added, “they are all trading in dollars or Yuan. They depend on foreign currency since the value of the North Korean currency has fallen so badly and also because there is a lack of large-denomination bills.”
Since 2000, Yuan has been in common use alongside the North Korean currency in border regions. The popularity of dollars is higher in Pyongyang and North and South Hwanghae Provinces. Especially in cases where the unit price of the item is high, such as for home appliances or industrial products, most are dealt with in dollars or Yuan.
However, this is also now spreading to lower value consumer goods like shoes and clothing. Dollar and Yuan prices are applied to such items even when the seller is not a foreign currency store or international hotel.
Despite the fact that the North Korean currency was redenominated at a rate of 100:1 on November 30th, 2009, the monetary authorities have not been able to break North Korea’s inflationary cycle. Currently, rice in North Korean markets goes for around 900 won per kilo, which is only around half the 2,000 won it cost prior to the redenomination, far from the approximately 20 won it would cost in a more stable economy.
The source explained, “The value of the won is unstable, making foreign currency exchange rates more volatile. So merchants are selling products at higher prices than normal to compensate for their losses. This phenomenon is creating in them the mentality of raising their product prices.”
He also emphasized, “Prices for all products imported from China are set in dollars or Yuan. Considering the fact more than 90% of products in the North Korean market come from China, it looks like a world in which the North Korean currency is useless is coming.”
The source added, “Since Yuan are used quite commonly in North Hamkyung Province, Yangkang Province, and Shinuiju, a phrase, ‘This is Chinese land!’ is spreading. At the same time, since the dollar is used a lot in Pyongyang, Sariwon, Haeju, and Wonsan, another joke suggesting that ‘here is U.S. soil!’ is going around as well.”
