Foreign currency service centers installed near markets and foreign-currency shops in North Korea are being consolidated. The move appears to be driven by the authorities’ growing difficulty in managing exchange rates as they continue to surge.
According to a Pyongyang-based source recently, the number of foreign currency service centers had grown since last year, but many are now being merged with nearby centers or absorbed into state-run foreign exchange service centers.
North Korea classifies currency exchange offices inside banks as state-run foreign exchange service centers, while branch-type exchanges located near markets, department stores, and foreign-currency shops are categorized as foreign currency service centers.
Locals often refer to official foreign currency service centers simply as foreign currency service centers, but according to the source, these centers are now being consolidated or shut down.
As of May, foreign currency service centers in Pyongyang and other major cities were still handling euros, yen, and rubles, but these are now handled only by official banks. “Earlier this month, the central authorities issued an order suspending the handling of euros, yen, and rubles at foreign currency service centers,” the source said.
State struggles to keep up with market forces
The consolidation of centers and the restriction on handling non-USD and non-CNY currencies is due to the state’s limited capacity to manage numerous centers, along with the difficulty of maintaining official exchange rates as the market rate has more than tripled since last year.
Indeed, according to Daily NK’s regular market price survey, the North Korean won–U.S. dollar exchange rate in Pyongyang rose from 8,300 won in January last year to 30,700 won earlier this month.
Even when the exchange rate climbed to 12,000 won in the first half of last year, the authorities distributed ideological materials ordering foreign currency service centers to “strictly maintain the 8,900 won per dollar rate.”
However, as market rates continued to rise, the authorities began posting daily rates at foreign currency service centers that were 5–30% below market rates, abandoning the fixed 8,900 won rate.
Still, the government appears unable to keep up with exchange rate volatility and can no longer afford to continue providing exchange services.
Until last year, authorities encouraged people to use foreign currency service centers and allowed individuals to purchase up to $300 per day. But currently, in Pyongyang’s Jung District, individuals can exchange no more than $20, and on some days, transactions are denied altogether due to a lack of available dollars.
By contrast, exchanging dollars or yuan into North Korean won continues without restriction.
This suggests that the authorities are facing a shortage of foreign currency reserves.
Meanwhile, the government continues cracking down on private money changers. As a result, small-scale street-level exchangers have become difficult to find in markets. Larger operators, however, are still conducting transactions discreetly in homes or other private locations with trusted clients.
That said, with the won plummeting and foreign exchange rates surging, even private money changers are increasingly reluctant to sell foreign currency.
“Just like during the 2009 currency reform, everyone is trying to hold onto their dollars,” the source said. “It’s difficult to buy dollars with North Korean won from a private money changer, and there are more and more dollar-based loan sharks lending in dollars and demanding interest in dollars as well.”
Translated by Kyungmin Kim.
