A North Korean state directive ordering people to
exchange their holdings of foreign currency for the domestic equivalent has ceased as the state moves onto a trade footing.
The North Korean authorities regularly try to
rein in domestic use of hard currency. It is noteworthy, however, that this particular directive remained in force for longer than average, around four months.
This lends credence to the idea that the Kim Jong Eun regime is particularly keen to generate reserves of hard currency.
“Enforcement of the order to exchange all hard currency has
begun to fade,” a source from the city told Daily NK on the 18th.
“Until recently it was being enforced, with agents from the
Ministry of Public Security attempting to intimidate donjuLiterally "masters of money," donju refers to people who hav... More [new affluent middle class] in their homes. However, there is none of that now.”
According to the source, in the period after the directive
was handed down, meetings of people’s units took place almost daily. During
these meetings, residents were repeatedly warned that anyone violating the
directive would face punishment.
Due in part to the prevailing tense atmosphere in the
capital following the execution of Jang Song Taek in December 2013, a
substantial percentage of people opted to abide by the order and exchange their
holdings of US Dollars and other foreign currencies. This was reflected in exchange
rates.
Analyzing the change, the source noted that the directive might have been quietly
abandoned by the state in order to avoid placing firms working abroad in
trouble.
“April is normally the time when official licenses to conduct
foreign trade are issued, but to engage in that task firms need a lot of
foreign currency,” he explained. “So the state wouldn’t benefit from pushing
companies to give up hard currency. They can’t afford not to trade overseas,
and this reflects that.”
Now that the directive is de facto invalid,
more people are apparently moving back in the direction of holding foreign currency, which is driving exchange rates back in their
former direction.
“People who had exchanged their foreign currency on the
basis that if the Upper [the authorities] were to take it they would be left
with nothing are now watching the situation carefully,” the source revealed.
“And because a greater number of people are seeking out US Dollars, 7300 won,
which was the exchange rate in early March, has turned into 7700 won. If the current
trend continues is likely to rise to 8000 won.”
Offering his perspective on the overall situation, the source
concluded, “This clampdown caused some people to hand over their hard currency
precisely because of the prevailing sense of fear. But now the market is
returning to normal, and people know very well of the benefits they can obtain.
They aren’t going to be moved by the directive anymore.”
