North Korea surrenders to foreign currency

CHANGBAI, SEOUL - Reuters

The use of dollars and Chinese yuan has accelerated since a revaluation of the North Korean won in 2009 wiped out the savings of millions of people. REUTERS photo

Chinese currency and U.S. dollars are being used more widely than ever in North Korea instead of the country’s own money, a stark illustration of the extent to which the leadership under Kim Jong-un has lost control over the economy.

The use of dollars and Chinese yuan, or renminbi, has accelerated since a disastrous revaluation of the North Korean won in 2009 wiped out the savings of millions of people, said experts on the country, defectors and Chinese border traders.

On the black market the won has shed more than 99 percent of its value against the dollar since the revaluation, according to exchange rates tracked by Daily NK, a Seoul-based news and information website about North Korea.

North Korea is one of the most closed countries in the world, so it is difficult to determine what impact this could ultimately have on Kim’s regime.

But experts said the growing use of foreign currency is making it increasingly difficult for Pyongyang to implement economic policy, resulting in the creation of a private economy outside the reach of the state that only draconian measures could rein in.

For now Pyongyang appeared to be capitulating, rather than trying to stamp out foreign currency use, they said.

Estimates of how much hard currency is in circulation vary, but an analyst at the Samsung Economic Research Institute in Seoul put it at $2 billion in an April study, out of an economy worth $21.5 billion, according to some assessments. Pyongyang doesn’t publish economic data.

North Korea made circulating foreign currency a crime punishable by death in September 2012, the Paris-based International Federation for Human Rights said in a report last month.